As filed with the Securities and Exchange Commission on September 10, 2002
Registration No. 333-97985
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
(Exact Name of Registrant as Specified in Its Charter)
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Pennsylvania 23-6216339
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
Bruce Goldman
Senior Vice President-General Counsel
The Bellevue, 200 S. Broad Street The Bellevue, 200 S. Broad Street
Philadelphia, Pennsylvania 19102 Philadelphia, Pennsylvania 19102
(215) 875-0700 (215) 875-0700
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Area Code, of Registrant's Principal Executive Offices) Number, Including Area Code, of Agent for Service)
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Copy to:
Howard A. Blum, Esquire
Drinker Biddle & Reath LLP
One Logan Square, 18th & Cherry Streets
Philadelphia, Pennsylvania 19103-6996
(215) 988-2700
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement as determined by
the Registrant, depending on market conditions and other factors.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| _________
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 2002
PROSPECTUS
$300,000,000
[LOGO]
Pennsylvania Real Estate Investment Trust
Shares of Beneficial Interest
Preferred Shares of Beneficial Interest
Senior Debt Securities
Senior Subordinated Debt Securities
Subordinated Debt Securities
Warrants
Units
We may use this prospectus to offer and sell securities from time to
time. The types of securities we may sell include:
o shares of beneficial interest, $1.00 par value per share, and
associated shareholder rights;
o preferred shares of beneficial interest;
o debt securities, which may be senior debt securities, senior
subordinated debt securities or subordinated debt securities;
o warrants exercisable for shares, preferred shares, debt securities or
other securities or rights; and
o units consisting of two or more classes of securities.
The form in which we are to issue the securities, their specific
designation, aggregate principal amount or aggregate initial offering price,
maturity, if any, rate and times of payment of interest or dividends, if any,
redemption, conversion, and sinking fund terms, if any, voting or other rights,
if any, exercise price and detachability, if any, and other specific terms will
be described in a supplement to this prospectus, together with the terms of the
offering of such securities.
Our shares of beneficial interest are traded on the New York Stock
Exchange under the symbol "PEI." Any prospectus supplement will also contain
information, where applicable, as to any other listing on a securities exchange
of the securities covered by such prospectus supplement. This prospectus may not
be used to sell securities unless it is accompanied by a prospectus supplement.
Consider carefully the Risk Factors beginning on page 2 before deciding
to invest in these securities.
These securities have not been approved or disapproved by the Securities and
Exchange Commission nor has the Securities and Exchange Commission passed upon
the accuracy or adequacy of this prospectus. Any representation to the contrary
is a criminal offense.
The date of this prospectus is __________, 2002.
Table of Contents
Page
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST............................... 1
RISK FACTORS............................................................ 2
SELECTED FINANCIAL DATA ................................................ 13
USE OF PROCEEDS......................................................... 14
RATIO OF EARNINGS TO FIXED CHARGES...................................... 14
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST............................ 15
DESCRIPTION OF PREFERRED SHARES OF BENEFICIAL INTEREST.................. 20
DESCRIPTION OF DEBT SECURITIES.......................................... 25
DESCRIPTION OF WARRANTS................................................. 45
DESCRIPTION OF UNITS.................................................... 46
SUMMARY OF THE TRUST AGREEMENT.......................................... 47
SUMMARY OF THE OPERATING PARTNERSHIP AGREEMENT.......................... 50
FEDERAL INCOME TAX CONSIDERATIONS....................................... 53
PLAN OF DISTRIBUTION.................................................... 62
LEGAL MATTERS........................................................... 64
EXPERTS ............................................................... 64
ABOUT THIS PROSPECTUS................................................... 64
WHERE YOU CAN FIND MORE INFORMATION..................................... 65
FORWARD LOOKING STATEMENTS.............................................. 67
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PREIT, which is organized as a business trust under Pennsylvania law,
is a fully integrated, self-administered and self-managed real estate investment
trust, founded in 1960, that acquires, develops, redevelops and operates retail
and multifamily properties. We conduct substantially all of our operations
through PREIT Associates, L.P., and we have elected, and conduct our operations
in a manner intended, to comply with the requirements for qualification as a
real estate investment trust (a "REIT") under the Real Estate Investment Trust
Act of 1960, Sections 856-60 of the Internal Revenue Code of 1986, as amended.
Our principal executive offices are located at The Bellevue, 200 S.
Broad St., Philadelphia, Pennsylvania, 19102, telephone: (215) 875-0700.
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RISK FACTORS
Real Estate Industry
We face risks associated with general economic conditions and local
real estate conditions in areas where we own properties
We may be affected adversely by general economic conditions and local
real estate conditions. For example, an oversupply of the types of properties
that we own in a local area or a decline in the attractiveness of our properties
to shoppers, residents or tenants would have a negative effect on us.
Other factors that may affect general economic conditions or local real
estate conditions include:
o population trends
o income tax laws
o availability and costs of financing
o construction costs
o weather conditions that may increase or decrease energy costs
We may be unable to compete with our larger competitors and other
alternatives to our portfolio of properties
The real estate business is highly competitive. We compete for
interests in properties with other real estate investors and purchasers, many of
whom have greater financial resources, revenues and geographical diversity than
we have. Furthermore, we compete for tenants with other property owners. All of
our properties are also subject to significant local competition. Our
multifamily properties compete with providers of other forms of housing, such as
single family housing. Competition from single family housing increases when
lower interest rates make mortgages more affordable. Further, our portfolio of
retail properties faces competition from internet-based operations that may be
capable of providing lower-cost alternatives to customers. If we expand our
portfolio to include additional types of properties, we may face additional
risks that are specific to those property types.
We are subject to significant regulation that restricts our activities
Local zoning and land use laws, environmental statutes and other
governmental requirements restrict our expansion, rehabilitation and
reconstruction activities. These regulations may prevent us from taking
advantage of economic opportunities.
Legislation such as the Americans with Disabilities Act may require us
to modify our properties. Future legislation may impose additional requirements.
We cannot predict what requirements may be enacted.
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Our Properties
We face risks that may restrict our ability to develop properties
There are risks associated with our development activities in addition
to those generally associated with the ownership and operation of established
retail centers and multifamily properties. These risks include:
o expenditure of money and time on projects that may never be
completed
o higher than estimated construction costs
o late completion because of unexpected delays in construction or in
the receipt of zoning or other regulatory approvals
o inability to obtain permanent financing upon completion of
development activities
The risks described above are compounded by the fact that we must
distribute 90% of our taxable income in order to maintain our qualification as a
REIT. As a result of these distribution requirements, new developments are
financed primarily through lines of credit or other forms of construction
financing. We may be unable to obtain this financing on terms that are favorable
to us, if at all.
Furthermore, we must acquire and develop suitable high traffic
properties at costs consistent with the overall economics of the project.
Because real estate development is extremely competitive, we cannot assure you
that we will be able to acquire additional appropriate sites within our
geographic markets.
Some of our properties are old and in need of maintenance and/or
renovation
Some of the properties in which we have an interest were constructed or
last renovated more than 10 years ago. Older properties may generate lower
rentals or may require significant capital expense for renovations. More than
forty percent of our multifamily properties have not been renovated in the last
ten years. Some of our multifamily properties lack amenities that are
customarily included in modern construction, such as dishwashers, central air
conditioning and microwave ovens. Some of our retail and multifamily properties
are difficult to lease because they are too large, too small or inappropriately
proportioned for today's market. We may be unable to remedy some forms of
obsolesence.
We may be unable to successfully integrate and effectively manage the
properties we acquire
Subject to the availability of financing and other considerations, we
intend to continue to acquire interests in properties that we believe will be
profitable or will enhance the value of our portfolios. Some of these properties
may have unknown characteristics or deficiencies. Therefore, it is possible that
some properties will be worth less or will generate less revenue than we believe
at the time of acquisition.
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To manage our growth effectively, we must successfully integrate new
acquisitions. We cannot assure you that we will be able to successfully
integrate or effectively manage additional properties.
When we acquire properties, we also take on other risks, including:
o financing risks (some of which are described below)
o the risk that we will not meet anticipated occupancy or rent levels
o the risk that we will not obtain required zoning, occupancy and
other governmental approvals
o the risk that there will be changes in applicable zoning and land
use laws that affect adversely the operation or development of our
properties
We may be unable to renew leases or relet space as leases expire
When a lease expires, a tenant may refuse to renew it. We may not be
able to relet the property on similar terms, if we are able to relet the
property at all. We have established an annual budget for renovation and
reletting expenses that we believe is reasonable in light of each property's
operating history and local market characteristics. This budget, however, may
not be sufficient to cover these expenses.
We have been and may continue to be affected negatively by tenant
bankruptcies and leasing delays
At any time, a tenant may experience a downturn in its business that
may weaken its financial condition. As a result, our tenants may delay lease
commencement, fail to make rental payments when due, or declare bankruptcy. Any
such event could result in the termination of that tenant's lease and losses to
us.
We receive a substantial portion of our retail property income as rents
under long-term leases. If retail tenants are unable to comply with the terms of
their leases because of rising costs or falling sales, we may modify lease terms
to allow tenants to pay a lower rental or a smaller share of operating costs and
taxes.
Future terrorist activity may have an adverse affect on our financial
condition and operating results
Future terrorist attacks in the United States, such as the attacks that
occurred in New York and Washington, D.C. on September 11, 2001 and other acts
of terrorism or war, may result in declining economic activity, which could harm
the demand for and the value of our properties. A decrease in demand would make
it difficult for us to renew or re-lease our properties at lease rates equal to
or above historical rates. Terrorist activities also could directly impact the
value of our properties through damage, destruction or loss, and the
availability of insurance for such acts may be less, or cost more, which would
adversely affect our financial condition and results of operations. To the
extent that our tenants are impacted by future attacks, their businesses
similarly could be adversely affected, including their ability to continue to
honor their existing leases. These acts may further erode business and consumer
confidence and spending, and may result in increased volatility in national and
international financial markets and economies. Any one of these events may
decrease demand for real estate, decrease or delay the occupancy of our new or
renovated properties, increase our operating expenses due to increased physical
security for our properties and limit our access to capital or increase our cost
of raising capital. We apply comprehensive planning and operational measures in
an effort to enhance the security of our employees, tenants and visitors at our
properties. This effort, a strong component of our operational program before
September 11th, undergoes regular review and, where necessary and appropriate,
improvement and enhancement. The need to enhance security measures and add
additional security personnel at our properties could increase the costs of
operating our properties with a materially adverse impact on our cash flows and
results of operations.
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We face risks associated with PREIT-RUBIN's management of properties
owned by third parties
PREIT-RUBIN manages a substantial number of properties owned by third
parties. Risks associated with the management of properties owned by third
parties include:
o the property owner's termination of the management contract
o loss of the management contract in connection with a property sale
o non-renewal of the management contract after expiration
o renewal of the management contract on terms less favorable than
current terms
o decline in management fees as a result of general real estate market
conditions or local market factors
o claims of losses due to allegations of mismanagement
The occurrence of one or more of these risks could have a material
adverse effect on our results of operations.
Coverage under our existing insurance policies may be inadequate to
cover losses
We generally maintain insurance policies related to our business,
including casualty, general liability and other policies covering our business
operations, employees and assets. However, we could be required to bear all
losses that are not adequately covered by insurance, including losses related to
terrorism, which generally are not covered by insurance. Although we believe
that our insurance programs are adequate, we cannot assure you that we will not
incur losses in excess of our insurance coverage. If we are unable to obtain
insurance in the future at acceptable levels and reasonable cost, the
possibility of losses in excess of our insurance coverage may increase and we
may not be able to comply with covenants under our debt agreements.
Insurance payouts resulting from the terrorist attacks occurring on
September 11, 2001 could significantly reduce the insurance industry's reserves.
Moreover, the demand for higher levels of insurance coverage will likely
increase because of these attacks. As a result, we expect our insurance premiums
to increase in the future, which may have a materially adverse impact on our
cash flow and results of operations. Furthermore, we may not be able to purchase
policies in the future with coverage limits and deductibles similar to those
that were available before the attacks. Because it is not possible to determine
what kind of policies will be available in the future and at what prices, there
is no guarantee that we will be able to maintain our pre-September 11, 2001
insurance coverage levels.
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We face risks due to lack of geographic diversity
Most of our properties are located in the eastern United States. A
majority of the properties are located either in Pennsylvania or Florida.
General economic conditions and local real estate conditions in these geographic
regions have a particularly strong effect on us. Other REITs may have a more
geographically diverse portfolio and thus may be less susceptible to downturns
in one or more regions.
We face possible environmental liabilities
Current and former real estate owners and operators may be required by
law to investigate and clean up hazardous substances released at the properties
they own or operate. They may also be liable to the government or to third
parties for substantial property damage, investigation costs and cleanup costs.
In addition, some environmental laws create a lien on the contaminated site in
favor of the government for damages and costs the government incurs in
connection with the contamination. Contamination may affect adversely the
owner's ability to sell or lease real estate or to borrow with the real estate
as collateral.
From time to time, we respond to inquiries from environmental
authorities with respect to properties both currently and formerly owned by us.
We cannot assure you of the results of pending investigations, but we do not
believe that resolution of these matters will have a material adverse effect on
our financial condition or results of operations.
We have no way of determining at this time the magnitude of any
potential liability to which we may be subject arising out of unknown
environmental conditions or violations with respect to the properties we
formerly owned. Environmental laws today can impose liability on a previous
owner or operator of a property that owned or operated the property at a time
when hazardous or toxic substances were disposed of, or released from, the
property. A conveyance of the property, therefore, does not relieve the owner or
operator from liability.
We are aware of certain environmental matters at some of our
properties, including ground water contamination, above-normal radon levels and
the presence of asbestos containing materials and lead-based paint. We have, in
the past, performed remediation of such environmental matters, and we are not
aware of any significant remaining potential liability relating to these
environmental matters. We may be required in the future to perform testing
relating to these matters. We cannot assure you that the amounts that we have
reserved for these matters will be adequate to cover future environmental costs.
- 6 -
At five properties in which we currently have an interest, and at two
properties in which we formerly had an interest, environmental conditions have
been or continue to be investigated and have not been fully remediated. At five
of these properties, groundwater contamination has been found. At two of the
properties with groundwater contamination, the former owners of the properties
are remediating the groundwater contamination. Dry cleaning operations were
performed at three of the properties in which we currently or formerly had an
interest. At two of the dry cleaning properties, soil contamination has been
identified and groundwater contamination was found at the other dry cleaning
property. Although the properties with contamination arising from dry cleaning
operations may be eligible under a state law for remediation with state funds,
we cannot assure you that sufficient funds will be available under the
legislation to pay the full costs of any such remediation.
There are asbestos-containing materials in a number of our properties,
primarily in the form of floor tiles and adhesives. The floor tiles and
adhesives are generally in good condition. Fire-proofing material containing
asbestos is present at some of our properties in limited concentrations or in
limited areas. At properties where radon has been identified as a potential
concern, we have remediated or are performing additional testing. Lead-based
paint has been identified at certain of our multifamily properties and we have
notified tenants under applicable disclosure requirements. Based on our current
knowledge, we do not believe that the future liabilities associated with
asbestos, radon and lead-based paint at the foregoing properties will be
material.
We are aware of environmental concerns at two of our development
properties. Our present view is that our share of any remediation costs
necessary in connection with the development of these properties will be within
the budgets for development of these properties (or, in the case of one of these
properties, our prospective partner, who also is the current owner of such
property, will address the environmental concerns prior to the commencement of
the development process), but the final costs and necessary remediation are not
known and may cause us to decide not to develop one or both of these properties.
We have limited environmental liability coverage for the types of
environmental liabilities described above. The policy covers liability for
pollution and on-site remediation limited to $2 million for any single claim and
further limited to $4 million in the aggregate. The policy expires on December
1, 2002.
Financing Risks
We face risks generally associated with our debt
We finance parts of our operations and acquisitions through debt. There
are risks associated with this debt, including:
o a decline in funds from operations from increases in rates on our
floating-rate debt
o forced disposition of assets resulting from a failure to repay or
refinance existing debt
o refinancing terms that are less favorable than the terms of existing
debt
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o default or foreclosure due to failure to meet required payments of
principal and interest
We may not be able to comply with leverage ratios imposed by our credit
facility or to use our credit facility when credit markets are tight
We currently use a three-year credit facility that is secured by
certain of our properties for working capital, acquisitions, construction of our
development properties, and renovations and capital improvements to our
properties. The credit facility currently requires our operating partnership,
PREIT Associates, to maintain certain asset and income to debt ratios and
minimum income and net worth levels. If, in the future, PREIT Associates fails
to meet any one or more of these requirements, we would be in default. The
lenders, in their sole discretion, may waive a default or we might secure
alternative or substitute financing. We cannot assure you, however, that we can
obtain waivers or alternative financing. Any default may have a materially
adverse effect on our operations and financial condition.
When the credit markets are tight, we may encounter resistance from
lenders when we seek financing or refinancing for some of our properties. If our
credit facility is reduced significantly or withdrawn, our operations would be
affected adversely. If we are unable to increase our borrowing capacity under
the credit facility, our ability to make acquisitions would be affected
adversely. We cannot assure you as to the availability or terms of financing for
any particular property.
We have entered into agreements limiting the interest rate on portions
of our credit facility. If other parties to these agreements fail to perform as
required by the agreements, we may suffer credit loss. Further, these agreements
expire in December of 2003 and we may be unable to replace them with agreements
with favorable terms, if at all.
We may be unable to obtain long-term financing required to finance our
partnerships and joint ventures
The profitability of each partnership or joint venture in which we are
a partner or co-venturer that has short-term financing or debt requiring a
balloon payment is dependent on the availability of long-term financing on
satisfactory terms. If satisfactory long-term financing is not available, we may
have to rely on other sources of short-term financing, equity contributions or
the proceeds of refinancing other properties to satisfy debt obligations.
Although we do not own the entire interest in connection with many of the
properties held by such partnerships or joint ventures, we may be required to
pay the full amount of any obligation of the partnership or joint venture that
we have guaranteed in whole or in part. Additionally, we may elect to pay a
partnership's or joint venture's obligation to protect our equity interest in
its properties and assets.
Some of our properties are held by special purpose entities and are not
generally available to satisfy creditors' claims in bankruptcy
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Some of our properties are owned or ground-leased by subsidiaries that
we created solely for that purpose. The mortgaged properties and related assets
are restricted solely for the payment of the related loans and are not available
to pay our other debts. The cash flow from these properties, however, is
available for our general use so long as no event of default has occurred and
after we have paid any debt services and provided for any required reserves
under the applicable loan agreement.
Governance
We may be unable to effectively manage our partnerships and joint
ventures due to disagreements with our partners and joint venturers
Generally, we hold interests in our portfolio properties through PREIT
Associates. In many cases we hold properties through joint ventures or
partnerships with third-parties and, thus, we hold less than 100% of the
ownership interests in these properties. Of the properties with respect to which
our ownership is partial, most are owned by partnerships in which we are a
general partner. The remaining properties are owned by joint ventures in which
we have substantially the same powers as a general partner. Under the terms of
the partnership and joint venture agreements, major decisions, such as a sale,
lease, refinancing, expansion or rehabilitation of a property, or a change of
property manager, require the consent of all partners or co-venturers. Necessary
actions may be delayed significantly because decisions must be unanimous. It may
be difficult or even impossible to change a property manager if a partner or
co-venturer is serving as the property manager.
Business disagreements with partners may arise. We may incur
substantial expenses in resolving these disputes. To preserve our investment, we
may be required to make commitments to or on behalf of a partnership or joint
venture during a dispute. Moreover, we cannot assure you that our resolution of
a dispute with a partner will be on terms that are favorable to us.
Other risks of investments in partnerships and joint ventures include:
o partners or co-venturers might become bankrupt or fail to fund their
share of required capital contributions
o partners or co-venturers might have business interests or goals that
are inconsistent with our business interests or goals
o partners or co-venturers may be in a position to take action
contrary to our policies or objectives
o potential liability for the actions of our partners or co-venturers
We are subject to restrictions that may impede our ability to effect a
change in control
Our Trust Agreement restricts the possibility of our sale or change in
control, even if a sale or change in control were in our shareholders' interest.
These restrictions include the ownership limit on our shares of beneficial
interest, which is designed to ensure qualification as a REIT, the staggered
terms of our Trustees and our ability to issue preferred shares. Additionally,
we have adopted a shareholder rights plan that may deter a potential acquiror
from attempting to acquire us.
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We have entered into agreements that may limit our ability to sell some
of our properties
Some limited partners of PREIT Associates may suffer adverse tax
consequences if certain properties owned by PREIT Associates are sold. As the
general partner of PREIT Associates, with respect to certain of these properties
we have agreed to indemnify the former property owners against tax liability
that they may incur if we sell these properties within a certain number of years
after we acquired them. In some cases, these agreements may make it uneconomical
for us to sell these properties, even in circumstances in which it otherwise
would be advantageous to do so.
We may issue preferred shares with greater rights than our shares of
beneficial interest
Our Board of Trustees may issue up to 25,000,000 preferred shares
without shareholder approval. Our Board of Trustees may determine the relative
rights, preferences and privileges of each class or series of preferred shares.
Because our Board of Trustees has the power to establish the preferences and
rights of the preferred shares, preferred shares may have preferences,
distributions, powers and rights senior to our shares of beneficial interest.
We may amend our business policies without your approval
Our Board of Trustees determines our growth, investment, financing,
capitalization, borrowing, REIT status, operating and distribution policies.
Although the Board of Trustees has no present intention to amend or revise any
of these policies, these policies may be amended or revised without notice to
shareholders. Accordingly, shareholders may not have control over changes in our
policies. We cannot assure you that changes in our policies will serve fully the
interests of all shareholders.
Limited partners of PREIT Associates may vote on fundamental changes we
propose
Our assets are generally held through PREIT Associates, a Delaware
limited partnership of which we are the sole general partner. We currently hold
a majority of the limited partner interests in PREIT Associates. However, PREIT
Associates may from time to time issue additional limited partner interests in
PREIT Associates to third parties in exchange for contributions of property to
PREIT Associates. These issuances will dilute our percentage ownership of PREIT
Associates. Limited partner interests in PREIT Associates generally do not carry
a right to vote on any matter voted on by our shareholders, although limited
partner interests may, under certain circumstances, be redeemed for our shares.
However, before the date on which at least half of the partnership interests
issued on September 30, 1997 in connection with our acquisition of The Rubin
Organization have been redeemed, the holders of partnership interests issued on
September 30, 1997 are entitled to vote, along with our shareholders as a single
class, on any proposal to merge, consolidate or sell substantially all of our
assets. Our partnership interest in PREIT Associates is not included for
purposes of determining when half of the partnership interests issued on
September 30, 1997 have been redeemed, nor are they counted as votes. We cannot
assure you that we will not agree to extend comparable rights to other limited
partners in PREIT Associates.
- 10 -
Our success depends in part on Ronald Rubin
We are dependent on the efforts of Ronald Rubin, our Chairman and Chief
Executive Officer. The loss of his services could have an adverse effect on our
operations.
Our officers who both work for us and have interests in properties that
we manage may have conflicts of interest
We provide management, leasing and development services for
partnerships and other ventures in which some of our officers, including Ronald
Rubin, our Chairman and Chief Executive Officer, have either direct or indirect
ownership interests. In addition, we lease substantial office space from an
entity in which some of our officers have an interest. Although we believe that
the terms of these transactions are no less favorable to us than the terms of
our other similar agreements, our officers who have interests in both sides of
these transactions face a conflict of interest in deciding to enter into these
agreements and in negotiating their terms.
Other Risks
We may fail to qualify as a REIT and you may incur tax liabilities as a
result
If we fail to qualify as a REIT, we will be subject to Federal income
tax at regular corporate rates. In addition, we might be barred from
qualification as a REIT for the four years following disqualification. The
additional tax incurred at regular corporate rates would reduce significantly
the cash flow available for distribution to shareholders and for debt service.
To qualify as a REIT, we must comply with certain highly technical and
complex requirements. We cannot be certain we have complied with such
requirements because there are few judicial and administrative interpretations
of these provisions. In addition, facts and circumstances that may be beyond our
control may affect our ability to qualify as a REIT. We cannot assure you that
new legislation, regulations, administrative interpretations or court decisions
will not change the tax laws significantly with respect to our qualification as
a REIT or with respect to the federal income tax consequences of qualification.
We believe that we have qualified as a REIT since our inception and intend to
continue to qualify as a REIT. However, we cannot assure you that we have been
qualified or will remain qualified.
We may be unable to comply with the strict income distribution
requirements applicable to REITs
To obtain the favorable treatment associated with qualifying as a REIT,
we are required each year to distribute to our shareholders at least 90% of our
net taxable income. In addition, we are subject to a tax on the undistributed
portion of our income at regular corporate rates and may also be subject to a 4%
excise tax on this undistributed income. We could be required to seek to borrow
funds on a short-term basis to meet the distribution requirements that are
necessary to achieve the tax benefits associated with qualifying as a REIT, even
if conditions are not favorable for borrowing.
- 11 -
You may have no effective remedy against Arthur Andersen LLP in
connection with a material misstatement or omission in our financial statements
included in this prospectus
After reasonable efforts, we have not been able to obtain the written
consent of Arthur Andersen to the incorporation by reference of its report on
our financial statements and schedules in this prospectus, and we have not filed
that consent in reliance on Rule 437a of the Securities Act. Because Arthur
Andersen has not consented to the incorporation by reference of its report in
this prospectus, your ability to assert claims against Arthur Andersen may be
limited. In particular, because of this lack of consent, you will not be able to
sue Arthur Andersen under Section 11 of the Securities Act for untrue statements
of a material fact, if any, contained in our financial statements and schedules
audited by Arthur Andersen that are incorporated by reference in this
prospectus, or omissions to state a material fact, if any, required to be stated
in those financial statements and schedules.
- 12 -
SELECTED FINANCIAL DATA
We adopted SFAS No. 142, "Goodwill and Other Intangible Assets," as of
January 1, 2002. Although the adoption of SFAS No. 142 would not have had a
substantial impact on our results of operations for the periods presented, the
following selected financial data presents our results of operations for the
periods presented in each case as if SFAS No. 142 had been in effect at the
beginning of such period. The data is being provided for your information and
should be read in conjunction with our financial statements, related notes and
other financial information incorporated herein by reference.
(Thousands of dollars, except per share results)
For the For the For the For the For the 4-Month For the Fiscal
Year Ended Year Ended Year Ended Year Ended Period Ended Year Ended
December 31, December 31, December 31, December 31, December 31, August 31,
2001 2000 1999 1998 1997(1) 1997
---- ---- ---- ---- ------- ----
Operating Results
Total revenues $113,582 $101,856 $90,364 $62,395 $17,252 $40,485
Income before extraordinary loss $19,789 $32,254 $20,739 $23,455 $6,262 $10,235
Impact of goodwill amortization (2) 423 291 215 115 29 --
-------- -------- -------- -------- -------- --------
Adjusted income before
extraordinary loss $20,212 $32,545 $20,954 $23,570 $6,291 $10,235
======== ======== ======== ======== ======== ========
Net income $19,789 $32,254 $20,739 $23,185 $5,962 $10,235
Impact of goodwill amortization (2) 423 291 215 115 29 --
-------- -------- -------- -------- -------- --------
Adjusted net income $20,212 $32,545 $20,954 $23,300 $5,991 $10,235
======== ======== ======== ======== ======== ========
Basic earnings per share $1.35 $2.41 $1.56 $1.74 $0.66 $1.18
Impact of goodwill amortization (2) 0.03 0.02 0.02 0.01 -- --
-------- -------- -------- -------- -------- --------
Adjusted basic earnings per share $1.38 $2.43 $1.58 $1.75 $0.66 $1.18
======== ======== ======== ======== ======== ========
Diluted earnings per share $1.35 $2.41 $1.56 $1.74 $0.66 $1.18
Impact of goodwill amortization (2) 0.03 0.02 0.02 0.01 -- --
-------- -------- -------- -------- -------- --------
Adjusted diluted earnings per share $1.38 $2.43 $1.58 $1.75 $0.66 $1.18
======== ======== ======== ======== ======== ========
Balance Sheet Data
Investments in real estate, at
Cost $650,460 $612,266 $577,521 $509,406 $287,926 $202,443
Total assets $602,628 $576,663 $547,590 $481,615 $265,566 $165,657
Total mortgage, bank and
Construction loans payable $360,373 $382,396 $364,634 $302,276 $103,939 $117,412
Minority interest $36,768 $29,766 $32,489 $28,045 $15,805 $540
Shareholders' equity $180,285 $143,906 $133,412 $137,082 $138,530 $40,899
Other Data
Cash flows from operating
Activities $37,655 $44,473 $29,437 $31,302 $4,237 $15,219
Cash distributions per share $2.04 $1.92 $1.88 $1.88 $0.47 $1.88
(1) We changed from a fiscal year end to a calendar year end in 1997.
(2) We refer you to footnote 12 of Notes To Unaudited Consolidated Financial
Statements from our Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, filed on August 14, 2002, for information regarding the impact of SFAS No.
142.
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USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement
accompanying this prospectus, we intend to use the net proceeds of any sale of
securities for general business purposes, including the development and
acquisition of additional properties and other acquisition transactions as
suitable opportunities arise, the payment of certain outstanding secured or
other indebtedness and improvements to certain properties in our portfolio.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges for each of the periods
indicated is as follows:
Six Months Ended Fiscal Years Ended
June 30, December 31,
-----------------------------------------------------------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997(1)
-----------------------------------------------------------------------------------------------------------------
1.40 1.32 1.44 1.55 1.55 1.93 1.55
-----------------------------------------------------------------------------------------------------------------
-------
(1) In 1997, we changed our fiscal year. Fiscal year information in the table
above is given with respect to the fiscal years ended December 31, 2001, 2000,
1999 and 1998, and the fiscal year ended August 31, 1997. For the period from
September 1, 1997 through December 31, 1997, the ratio was 1.53.
The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. For this purpose, earnings consist of income before
gains from sales of property, plus fixed charges reduced by the amounts of
capitalized interest, plus income allocable to minority interests in
consolidated entities that have incurred fixed charges. Fixed charges consist of
interest expense (including interest costs capitalized) and amortization of
capitalized expenses. Earnings and fixed charges are based on both wholly owned
properties and our share of partnership and joint venture properties. To date,
we have not issued any preferred shares, therefore, the ratios of earnings to
combined fixed charges and preferred share dividends are not presented.
- 14 -
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
Under the Trust Agreement, we have the authority to issue up to
100,000,000 shares and up to 25,000,000 preferred shares.
General Provisions
Voting, Dividend and Other Rights. Subject to the provisions of the
Trust Agreement regarding "Excess Shares" (See " -- Restrictions on Transfer"),
(i) the holders of our shares are entitled to one vote per share on all matters
voted on by shareholders, including elections of Trustees, and (ii), subject to
the rights of holders of any preferred shares, the holders of our shares are
entitled to a pro rata portion of such distributions as may be declared from
time to time by our Trustees from funds available therefor, and upon liquidation
are entitled to receive pro rata all of our assets available for distribution to
such holders. The majority of shares voting on a matter at a meeting at which at
least a majority of our outstanding shares are present in person or by proxy
constitutes the act of the shareholders, except with respect to the election of
Trustees (see below). Our Trust Agreement permits the holders of securities of
our affiliates to vote with our shareholders on certain matters, and our
Trustees have granted that right to holders of currently outstanding units of
limited partnership interest in the PREIT Associates, L.P. ("OP Units") with
respect to fundamental changes in us (i.e. mergers, consolidations and sales of
substantially all of our assets). See "Summary of the Operating Partnership
Agreement -- Authorization of OP Units and Voting Rights." Shareholders do not
have any pre-emptive rights to purchase our securities.
Our Trust Agreement provides that our Trustees may issue multiple
classes and series of shares of beneficial interest (including classes and
series of preferred shares having preferences to the existing shares in any
matter, including rights in liquidation or to dividends) and options, rights
(including shareholder rights plans), and other securities having conversion or
option rights and may authorize the creation and issuance by our subsidiaries
and affiliates of securities having conversion and option rights in respect of
shares. Thus, the rights of holders of existing shares are subject to preferred
rights as to dividends and in liquidation (and other such matters) to the extent
set forth in any subsequently authorized preferred shares or class of preferred
shares.
Board of Trustees. Our Board of Trustees is divided into three classes
serving staggered three-year terms. Our Trust Agreement does not provide for
cumulative voting in the election of Trustees, and the candidates receiving the
highest number of votes are elected to the office of Trustee.
Trustee Nomination Process. Our Trust Agreement provides that
nominations for election to the office of Trustee at any Annual or Special
Meeting of Shareholders shall be made by our Trustees, or by petition in writing
delivered to our Secretary not fewer than thirty-five days before the meeting
signed by the holders of at least two percent of the shares outstanding on the
date of the petition. Nominations not made in accordance with these procedures
will not be considered unless the number of persons nominated is fewer than the
number of persons to be elected to the office of Trustee at the meeting. In this
latter event, nominations for the Trustee positions which would not otherwise be
filled may be made at the meeting by any person entitled to vote in the election
of Trustees.
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Shareholder Rights Plan
We have adopted a shareholder rights plan. The description and terms of
the rights are set forth in a Rights Agreement, dated as of April 30, 1999, as
the same may be amended from time to time (the "Rights Agreement"), between us
and American Stock Transfer and Trust Company, as rights agent (the "Rights
Agent"). Each right entitles its registered holder to purchase from us one share
at a price of $70.00 (the "Exercise Price"), subject to certain adjustments.
The rights, unless earlier redeemed or exchanged by our Board of
Trustees, become exercisable upon the close of business on the day (the
"Distribution Date") that is the earlier of (i) the tenth day following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person"), with certain exceptions set forth below, has acquired
beneficial ownership or voting control of 15% or more of our outstanding voting
shares, and (ii) the tenth business day (or such later date as may be determined
by our Board of Trustees prior to such time as any person or group of affiliated
or associated persons becomes an Acquiring Person) after the date of the
commencement or public announcement of a person's or group's intention to
commence a tender or exchange offer the consummation of which would result in
the acquisition of beneficial ownership or voting control of 15% or more our
outstanding voting shares (even if no shares are actually acquired pursuant to
such offer). The rights will expire at the close of business on March 31, 2009,
unless earlier redeemed or exchanged by us as described below.
Unless the rights are redeemed or exchanged, if a person or group of
affiliated or associated persons become an Acquiring Person, each holder of
record of a right, other than the Acquiring Person (whose rights will become
null and void), will have the right to pay the Exercise Price in return for
shares having a market value equal to double the Exercise Price. In addition,
after a person or group becomes an Acquiring Person, if we were to undergo a
change of control, each holder of record of a right, other than the Acquiring
Person (whose rights will become null and void), will have the right to pay the
Exercise Price in return for shares of the acquiring entity having a market
value equal to double the Exercise Price.
At any time after any person or group of affiliated or associated
persons becomes an Acquiring Person and prior to the acquisition by such
Acquiring Person of 50% or more of our outstanding voting shares, our Board of
Trustees may exchange the rights (other than rights owned by the Acquiring
Person which will have become null and void), in whole or in part, at an
exchange ratio of one share per right (subject to adjustment).
The rights have anti-takeover effects in that they will cause
substantial dilution to a person or group of affiliated or associated persons
that attempts to acquire us on terms not approved by our Board of Trustees. The
rights should not interfere with any merger or other business combination
approved by our Board of Trustees because the rights may be redeemed by us at
$0.001 per right at any time until the close of business on the tenth day (or
such later date as described above) after a person or group has obtained
beneficial ownership or voting control of 15% or more of our voting shares.
- 16 -
Limited Liability of Shareholders
Our Trust Agreement provides that shareholders, to the fullest extent
permitted by applicable law, are not liable for any act, omission or liability
of a Trustee and that our Trustees have no general power to bind shareholders
personally. Notwithstanding the foregoing, there may be liability in some
jurisdictions that may decline to recognize a business trust as a valid
organization. With respect to all types of claims in such jurisdictions, and
with respect to tort claims, certain contract claims and possible tax claims in
jurisdictions where the business trust is treated as a partnership for certain
purposes, shareholders may be personally liable for such obligations to the
extent that we do not satisfy such claims. We conduct substantially all of our
business in jurisdictions other than the Commonwealth of Pennsylvania in
entities recognized in the relevant jurisdiction to limit the liability of
equity owners. We carry insurance in amounts which the Trustees deem adequate to
cover foreseeable tort claims.
Restrictions on Transfer
Among the requirements for our qualification as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"), are (i) not more than
50% in value of our outstanding shares of beneficial interest may be owned,
directly or by attribution, by five or fewer individuals (as defined in the Code
to include certain entities) during the last half of a taxable year, (ii) the
shares must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months or during a proportionate part of a shorter
taxable year, and (iii) certain percentages of our gross income must be from
particular activities. In order to continue to qualify as a REIT under the Code,
our Trustees have adopted, and our shareholders have approved, provisions of our
Trust Agreement that restrict the ownership and transfer of shares (the
"Ownership Limit Provisions").
The Ownership Limit Provisions provide that no person may beneficially
own, or be deemed to own by virtue of the attribution provisions of the Code,
more than 9.9% of our shares of beneficial interest, whether measured by vote,
value or number of our outstanding shares. Our Trustees may waive the Ownership
Limit Provisions if evidence satisfactory to the Trustees and our tax counsel is
presented that such ownership will not jeopardize our status as a REIT.
Issuance or transfers of shares in violation of the Ownership Limit
Provisions or which would cause us to be beneficially owned by fewer than 100
persons are void ab initio and the intended transferee acquires no rights to the
shares.
In the event of a purported transfer or other event that would, if
effective, result in the ownership of shares in violation of the Ownership Limit
Provisions, such transfer or other event with respect to that number of shares
that would be owned by the transferee in excess of the Ownership Limit
Provisions automatically are exchanged for excess shares (the "Excess Shares"),
authorized by our Trust Agreement, according to the rules set forth therein, to
the extent necessary to insure that the purported transfer or other event does
not result in the ownership of shares in violation of the Ownership Limit
Provisions. Any purported transferee or other purported holder of Excess Shares
is required to give written notice to us of a purported transfer or other event
that would result in the issuance of Excess Shares.
- 17 -
Excess Shares are not treasury shares but rather continue as issued and
outstanding shares of beneficial interest. While outstanding, Excess Shares will
be held in trust. The trustee of such trust shall be us. The beneficiary of such
trust shall be designated by the purported holder of the Excess Shares. Excess
Shares are not entitled to any dividends or distributions. If, after the
purported transfer or other event resulting in an exchange of shares of
beneficial interest for Excess Shares and prior to our discovery of such
exchange, dividends or distributions are paid with respect to the shares that
were exchanged for Excess Shares, then such dividends or distributions are to be
repaid to us upon demand. Excess Shares participate ratably (based on the total
number of shares and Excess Shares) in any liquidation, dissolution or winding
up of us. Except as required by law, holders of Excess Shares are not entitled
to vote such shares on any matter. While Excess Shares are held in trust, any
interest in that trust may be transferred by the trustee only to a person whose
ownership of shares will not violate the Ownership Limit Provisions, at which
time the Excess Shares will be automatically exchanged for the same number of
shares of the same type and class as the shares for which the Excess Shares were
originally exchanged. Our Trust Agreement contains provisions that are designed
to insure that the purported transferee or other purported holder of Excess
Shares does not receive in return for such a transfer an amount that reflects
any appreciation in the shares for which Excess Shares were exchanged during the
period that such Excess Shares were outstanding. Any amount received by a
purported transferee or other purported holder in excess of the amount permitted
to be received must be paid to us. If the foregoing restrictions are determined
to be invalid by any court of competent jurisdiction then the intended
transferee or holder of any Excess Shares may be deemed, at our option, to have
acted as an agent on our behalf in acquiring such Excess Shares and to hold such
Excess Shares on our behalf.
Our Trust Agreement further provides that Excess Shares shall be deemed
to have been offered for sale to us at the lesser of the price paid for the
shares by the purported transferee or in the case of a gift, devise or other
transaction, the market price for such shares at the time of such gift, devise
or other transaction or the market price for the shares on the date we or our
designee exercises its option to purchase. We may purchase such Excess Shares
during a 90-day period, beginning on the date of the violative transfer if the
original transferee-shareholder gives notice to us of the transfer or, if no
notice is given, the date our Board of Trustees determines that a violative
transfer has been made.
Each shareholder upon demand is required to disclose to us in writing
such information with respect to the direct, indirect and constructive ownership
of shares as our Board of Trustees deems necessary to comply with the provisions
of our Trust Agreement or the Code applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency. Certificates
representing shares of any class or series issued after September 29, 1997 will
bear a legend referring to the restrictions described above.
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Change-in-Control Provisions
In addition to our shareholder rights plan, the following may deter a
potential acquiror from acquiring us:
Ownership Limit. In order to protect our status as a REIT, we must
satisfy certain conditions, including the conditions that: (i) not more than 50%
in value of our outstanding shares may be owned, directly or by attribution, by
five or fewer individuals (as defined in the Code to include certain entities);
and (ii) the shares must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of 12 months or during a proportionate part of
a shorter taxable year. To this end, our Trust Agreement, among other things,
prohibits: (a) any holder from owning more than 9.9% of our outstanding shares
of beneficial interest without the consent of our Board of Trustees after
evidence satisfactory to our Trustees and tax counsel is presented that such
ownership will not jeopardize our tax status as a REIT, and (b) transfers of
shares that would cause us to be beneficially owned by fewer than 100 persons.
Staggered Board. Our Board of Trustees has three classes of trustees.
The term of office of one class expires each year. Trustees for each class are
elected for three-year terms upon the expiration of the respective class' term.
The staggered terms for Trustees may affect our shareholders' ability to take
control of us, even if a change in control were in the shareholders' interest.
Multiple Classes and Series of Shares of Beneficial Interest. Our Trust
Agreement provides that our Trustees may create and issue multiple classes and
series of preferred shares of beneficial interest (including classes and series
of preferred shares having preferences to the existing shares in any matter,
including rights in liquidation or to dividends) and options, rights (including
shareholder rights plans), and other securities having conversion or option
rights and may authorize the creation and issuance by our subsidiaries and
affiliates of securities having conversion and option rights in respect of
shares. Our Trust Agreement further provides that the terms of such rights or
other securities may provide for disparate treatment of certain holders or
groups of holders of such rights or other securities. The issuance of such
rights or preferred shares could have the effect of delaying or preventing a
change of control over us, even if a change in control were in the shareholders'
interest.
- 19 -
DESCRIPTION OF PREFERRED SHARES OF BENEFICIAL INTEREST
Our Trust Agreement authorizes our Board of Trustees from time to time
to establish and issue, in one or more classes or series, up to 25,000,000
preferred shares. The following description of the preferred shares sets forth
certain general terms and provisions of the preferred shares to which any
prospectus supplement may relate. The statements below describing the preferred
shares are in all respects subject to and qualified in their entirety by
reference to the applicable provisions of our Trust Agreement.
The Board of Trustees
Our Board of Trustees is empowered by the Trust Agreement to designate
and issue from time to time one or more series of preferred shares without
shareholder approval. The Board of Trustees may determine the relative rights,
preferences, privileges, qualifications, limitations and restrictions of each
series of preferred shares so issued. Because the Board of Trustees has the
power to establish the rights and preferences of each series of preferred
shares, it may afford the holders of any series of preferred shares preferences
and rights, voting or otherwise, senior to the rights of holders of shares. The
preferred shares will, when issued, be fully paid and nonassessable.
The prospectus supplement relating to any preferred shares offered
thereby will contain specific terms, including:
o The title and stated value of such preferred shares;
o The number of such preferred shares offered, the liquidation
preference per share and the offering price of such preferred
shares;
o The dividend rate(s), period(s) and/or payment date(s) or
method(s)of calculation thereof applicable to such preferred shares;
o The date from which dividends on such preferred shares shall
accumulate, if applicable;
o The procedures for any auction and remarketing, if any, for such
preferred shares;
o The provision for a sinking fund, if any, for such preferred shares;
o The provision for redemption, if applicable, of such preferred
shares;
o Any listing of such preferred shares on any securities exchange;
o The terms and conditions, if applicable, upon which such preferred
shares will be convertible into shares, including the conversion
price (or manner of calculation thereof);
o Any other specific terms, preferences, rights, limitations or
restrictions of such preferred shares;
o A discussion of federal income tax considerations applicable to such
preferred shares;
o The relative ranking and preferences of such preferred shares as to
dividend rights and rights upon our liquidation, dissolution or
winding up of our affairs;
- 20 -
o Any limitations on issuance of any series of preferred shares
ranking senior to or on a parity with such series of preferred
shares as to dividend rights and rights upon our liquidation,
dissolution or winding up of our affairs; and
o Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve our
status as a REIT.
Rank
Unless otherwise specified in the prospectus supplement, the preferred
shares will, with respect to dividend rights and rights upon our liquidation,
dissolution or winding up, rank (i) senior to all classes or series of our
shares, and to all other equity securities ranking junior to such preferred
shares; (ii) on a parity with all equity securities we issue with terms that
specifically provide that such equity securities rank on a parity with the
preferred shares; and (iii) junior to all equity securities we issue with terms
that specifically provide that such equity securities rank senior to the
preferred shares.
Dividends
Holders of the preferred shares of each series will be entitled to
receive, when, as and if declared by our Board of Trustees, out of our assets
legally available for payment, cash dividends at such rates and on such dates as
will be set forth in the applicable prospectus supplement. These dividends will
be payable to holders of record as they appear on our share transfer books on
the record dates fixed by the Board of Trustees.
Dividends on any series of preferred shares may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement. If
cumulative, dividends will accumulate from and after the date set forth in the
applicable prospectus supplement. If the Board of Trustees fails to declare a
dividend on any series of the preferred shares for which dividends are
non-cumulative, then the holders of that series will have no right to receive a
dividend in respect of the dividend period ending on the applicable dividend
payment date. In this case, we will not be obligated to pay the dividend accrued
for this period, whether or not dividends on the series are declared payable on
any future dividend payment date.
If any preferred shares of any series are outstanding, we will neither
declare nor pay or set apart for payment any dividends on any of our capital
shares that rank on a parity with or junior to those preferred shares, unless:
o where preferred shares have a cumulative dividend, we have declared
full cumulative dividends and have either paid these dividends or
have set apart a sum sufficient for payment for all past dividend
periods and the then current dividend period; or
o where preferred shares do not have a cumulative dividend, we have
declared full dividends for the then current dividend period and
have either paid or set aside a sum sufficient for the payment
thereof.
- 21 -
Except in the same two cases noted above, we also will not redeem,
purchase or otherwise acquire any of our capital shares that rank on a parity
with or junior to our preferred shares for cash, nor will we pay or make
available any sinking fund for the redemption of any such shares. We may,
however, convert or exchange these shares for other capital shares that rank
junior to the preferred shares both as to dividends and upon liquidation.
When we do not pay or set aside a sum sufficient for the payment of
full dividends on our preferred shares and on any other series of preferred
shares ranking on a parity as to dividends, all dividends that we declare on
these preferred shares will be declared pro rata so that the amount of dividends
declared per share is proportionate to the accrued dividends per share on the
respective series of preferred shares. We will not pay interest, or money in
lieu of interest, in respect of any dividend payment or payments on preferred
shares that may be in arrears.
Redemption
If so provided in the applicable prospectus supplement, the preferred
shares will be subject to mandatory redemption or redemption at our option, in
whole or in part, in each case upon the terms, at the times and at the
redemption prices set forth in such prospectus supplement.
The prospectus supplement relating to a series of preferred shares that
is subject to mandatory redemption will specify the number of such preferred
shares that shall be redeemed by us in each year commencing after a date to be
specified, at a redemption price per share to be specified, together with an
amount equal to all accrued and unpaid dividends thereon (which shall not, if
such preferred shares do not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable prospectus supplement.
Notwithstanding the foregoing, we will not redeem less than all of our
then outstanding preferred shares unless:
o where preferred shares have a cumulative dividend, we have declared
full cumulative dividends and have either paid these dividends or
have set apart a sum sufficient for payment for all past dividend
periods and the then current dividend period; or
o where the preferred shares do not have a cumulative dividend, we
have declared full dividends for the then current dividend period
and have either paid or set aside a sum sufficient for the payment
thereof.
The foregoing, however, will not prevent us from purchasing or acquiring
preferred shares to preserve our REIT status or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding preferred
shares of such series.
If fewer than all of the outstanding preferred shares of any series are
to be redeemed, the number of shares to be redeemed will be determined by us and
such shares may be redeemed pro rata from the holders of record of such shares
in proportion to the number of such shares held or for which redemption is
requested by such holder (with adjustments to avoid redemption of fractional
shares) or by lot in a manner determined by us.
- 22 -
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding
up of our affairs, then, before any distribution or payment shall be made to the
holders of any shares or any other class or series of our capital shares ranking
junior to the preferred shares in the distribution of assets upon our
liquidation, dissolution or winding up, the holders of each series of preferred
shares shall be entitled to receive out of our assets legally available for
distribution to shareholders liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable prospectus
supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such preferred shares do not have a cumulative
dividend). Unless otherwise set forth in the applicable prospectus supplement,
after payment of the full amount of the liquidating distributions to which they
are entitled, the holders of preferred shares will have no right or claim to any
of our remaining assets. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, our available assets are
insufficient to pay the amount of the liquidating distributions on all
outstanding preferred shares and the corresponding amounts payable on all shares
of other classes or series of our capital shares ranking on a parity with the
preferred shares in the distribution of assets, then the holders of the
preferred shares and all other such classes or series of capital shares shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
Voting Rights
Holders of preferred shares will have the voting rights set forth in
the applicable prospectus supplement.
Conversion Rights
The terms and conditions, if any, upon which any series of preferred
shares is convertible into shares will be set forth in the applicable prospectus
supplement relating thereto. Such terms will include the number of shares into
which the preferred shares are convertible, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether conversion
will be at the option of the holders of our preferred shares, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such series of preferred shares and
the listing on the New York Stock Exchange of the shares into which the
preferred shares are convertible.
Limited Liability of Shareholders
As discussed above under "Description of Shares of Beneficial Interest
-- Limited Liability of Shareholders," our Trust Agreement provides that
shareholders, to the fullest extent permitted by applicable law, are not liable
for any act, omission or liability of a Trustee and that our Trustees have no
general power to bind shareholders personally. Notwithstanding the foregoing,
there may be liability in some jurisdictions that may decline to recognize a
business trust as a valid organization. With respect to all types of claims in
such jurisdictions, and with respect to tort claims, certain contract claims and
possible tax claims in jurisdictions where the business trust is treated as a
partnership for certain purposes, shareholders may be personally liable for such
obligations to the extent that we do not satisfy such claims. We conduct
substantially all of our business in jurisdictions other than the Commonwealth
of Pennsylvania in entities recognized in the relevant jurisdiction to limit the
liability of equity owners. We carry insurance in amounts which the Trustees
deem adequate to cover foreseeable tort claims.
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Restrictions on Ownership
As discussed above under "Description of Shares of Beneficial Interest
-- Restrictions on Transfers," for us to qualify as a REIT under the Code, not
more than 50% in value of our outstanding shares, including any preferred
shares, may be owned, directly or by attribution, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist us in meeting this requirement, we may take certain
actions to limit the beneficial ownership, directly or indirectly, by a single
person our outstanding equity securities, including any preferred shares.
Therefore, the terms of each series of preferred shares may contain provisions
restricting the ownership and transfer of preferred shares.
Registrar and Transfer Agent
The Registrar and Transfer Agent for the preferred shares will be set
forth in the applicable prospectus supplement.
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DESCRIPTION OF DEBT SECURITIES
The following is a general description of the debt securities which we
may issue from time to time. The particular terms relating to each debt security
will be set forth in a prospectus supplement.
The debt securities will be our direct obligations. The senior debt
securities will rank equally with all of our other senior and unsubordinated
debt. The senior subordinated debt securities will have a junior position to all
of our senior debt. The subordinated debt securities will have a junior position
to all of our senior debt and all of our senior subordinated debt. The senior
debt securities will be issued under a senior debt indenture, the senior
subordinated debt securities will be issued under a senior subordinated debt
indenture, and the subordinated debt securities will be issued under a
subordinated debt indenture. The indentures will be qualified under the Trust
Indenture Act of 1939.
We have summarized below the material provisions of the indentures. The
summary is not complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the forms of indentures, which are
filed as exhibits to the registration statement. You should read the indentures
for provisions that may be important to you.
Terms Applicable to All Debt Securities
No Limit on Debt Amounts. The indentures do not limit the amount of
debt which can be issued under the indentures. These amounts are set from time
to time by our Board of Trustees.
Prospectus Supplements. The applicable prospectus supplement will
summarize the specific terms for the debt securities and the related offering
including, with respect to each series of debt securities, some or all of the
following:
o title and form of the securities;
o offering price;
o any limit on the amount that may be issued;
o maturity date(s);
o interest rate or the method of computing the interest rate;
o dates on which interest will accrue, or how the dates will be
determined, the interest payment dates and any related record dates;
o the place or places where debt securities may be surrendered for
registration of transfer or for exchange, where notices and demands
to or upon us in respect of the debt securities and the indentures
may be served and where notices to holders will be published;
o terms and conditions on which the debt securities may be redeemed,
in whole or in part, at our option;
o date(s), if any, on which, and the price(s) at which we are
obligated to redeem, or at the holder's option to purchase, in whole
or in part, the debt securities and related terms and provisions;
o details of any required sinking fund payments;
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o the currency or currencies in which the debt securities will be
denominated or payable, if other than U.S. dollars;
o any index, formula or other method by which payments on the debt
securities will be determined, and any special voting or defeasance
provisions in connection with a determination, if the amount of
payments are to be determined with reference to an index, formula or
other method;
o the persons to whom payments of interest will be made;
o any provisions granting special rights to holders when a specified
event occurs;
o any changes to or additional events of default or covenants;
o any special tax implications of the debt securities; including under
what circumstances, if any, and with what procedures and
documentation we will pay additional amounts on the debt securities
held by a non-U.S. person in respect of taxes, assessments or
similar charges withheld or deducted and, if so, the terms related
to any option we will have to redeem those debt securities rather
than pay those additional amounts;
o whether or not the debt securities will be issued in global form and
who the depository will be;
o any restrictions on the registration, transfer or exchange of the
debt securities;
o terms, if any, on which a series of debt securities may be
convertible into or exchangeable for our shares, preferred shares or
other debt securities, including provisions as to whether conversion
or exchange is mandatory, at the option of the holder or at our
option;
o if the debt securities are convertible or exchangeable, the events
or circumstances which will result in adjustments to the conversion
or exchange price and the formulae for determining the adjusted
price;
o whether the debt securities are secured or unsecured, and if
secured, the amount and form of the security and related terms;
o subordination terms of any senior subordinated debt securities and
subordinated debt securities; and
o any other terms that are not inconsistent with the indenture
applicable to a series of debt securities, including any terms which
may be required by or advisable under United States laws or
regulations or advisable (as determined by us) in connection with
the marketing of that series of debt securities.
Unless otherwise provided in an applicable indenture relating to debt
securities, the debt securities will be issued only in fully registered form,
without coupons, in denominations of $1,000 or any integral multiple thereof. No
service charge will be made for any transfer or exchange of the debt securities,
but we may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with a transfer or exchange, other
than exchanges not involving any transfer, like the issuance of definitive
securities in replacement of temporary securities or the issuance of new
securities upon surrender of a security that is redeemed or purchased in part.
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A series of debt securities may be issued under the relevant indenture
as original issue discount securities, which are securities that are offered and
sold at a substantial discount from their stated principal amount. In addition,
debt securities offered and sold at their stated principal amount may under some
circumstances, pursuant to applicable Treasury Regulations, be treated as issued
at an original issue discount for federal income tax purposes. Federal income
tax consequences and other special considerations applicable to any such
original issue discount securities (or other debt securities treated as issued
at an original issue discount) will be described in the prospectus supplement
relating to those securities.
Covenants. We will agree in the indentures to:
o pay the principal, interest and any premium on the debt securities
when due;
o maintain an office or agency in New York City, where debt securities
may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon us in respect of the debt
securities and the relevant indenture(s) may be served;
o prepare and file or deliver certain reports, as more fully specified
in the relevant indenture, with the trustee under the relevant
indenture, the SEC, and/or registered holders of debt securities, as
the case may be;
o deliver to the trustee under the relevant indenture, as more fully
specified in that indenture, officers' certificates relating to our
compliance under the relevant indenture and the occurrence of any
default or event of default under that indenture;
o file with the trustee under the relevant indenture and the SEC, in
accordance with, and as may be required by, the rules and
regulations prescribed from time to time by the SEC, the additional
information, documents and reports with respect to compliance by us
with the conditions and covenants provided for in the relevant
indenture;
o unless our Board of Trustees determines that it is no longer
desirable in the conduct of our business and our significant
subsidiaries, taken as a whole, and that there will be no adverse
impact in any material respect to the holders of debt securities,
subject to those exceptions as more fully specified in the relevant
indenture, do or cause to be done all things necessary to preserve
and keep in full force and effect:
o our existence as a business trust, and the corporate, partnership or
other existence of each of our significant subsidiaries, in
accordance with their respective organizational documents;
o the rights, licenses and franchises of us and certain of our
subsidiaries; and
o not at any time seek application of any applicable stay, extension
or usury law that may affect the covenants or the performance under
the indentures.
Consolidation, Merger and Sale of Assets. We will not consolidate with
or merge into any other entity or transfer all or substantially all of our
assets unless:
o we are the surviving entity;
o the successor or surviving entity assumes all of our obligations
under the debt securities and the indentures pursuant to
supplemental indentures in forms reasonably satisfactory to the
trustee(s) under the relevant indentures; and
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o immediately after we consolidate or merge, no event of default and
no event which, after notice or lapse of time, or both, would become
an event of default, will have happened and be continuing.
Upon any consolidation, merger or transfer, the successor will be
substituted for us under the indenture and we will be relieved of all
obligations and covenants under the indenture and the debt securities, but we
will not be relieved of the obligation to pay the principal of and interest on
the debt securities, except in the case of a sale of all of our assets that
meets the requirements stated in the immediately preceding paragraph.
Satisfaction and Discharge. Upon our request, the relevant indenture
will no longer be effective with respect to any series for almost all purposes
if either:
o all outstanding securities of that series have been delivered to the
trustee for cancellation, we have paid all sums payable in respect
of that series and we have delivered to the trustee a certificate
and opinion of legal counsel that all conditions precedent to
satisfaction and discharge have been fulfilled; or
o the only securities which are still outstanding have, or within one
year will, become due and payable or are to be called for
redemption, we have deposited with the trustee funds which are
sufficient to make all future payments, no default or event of
default will have occurred and be continuing on the date of that
deposit and that deposit will not result in a breach of any other
instrument by which we are bound, we have paid all other sums
payable in respect of that series, and we have delivered to the
trustee a certificate and opinion of counsel that all conditions
precedent to satisfaction and discharge have been fulfilled.
Legal Defeasance and Covenant Defeasance. Under each indenture, we may
elect with respect to a series of debt securities at our option and subject to
the satisfaction of the conditions described below, either:
o to be deemed to have paid and discharged the entire indebtedness
represented by the outstanding debt securities of the applicable
series and to have satisfied all of our other obligations under the
debt securities of the applicable series and under the provisions of
the relevant indenture, which we refer to as legal defeasance; or
o to be released from some of our obligations under the relevant
indenture, which we refer to as covenant defeasance.
We can exercise legal or covenant defeasance if we put in place the
following arrangements:
o we must irrevocably deposit with the applicable indenture trustee
(or another trustee meeting certain eligibility requirements and
agreeing to be bound by the applicable provisions of the relevant
indenture), in trust, for the benefit of the holders of the
applicable series of debt securities:
o cash in United States dollars;
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o non-callable and non-redeemable direct obligations of the United
States of America or of an agency or instrumentality controlled or
supervised by the United States of America, in each instance, the
payment of which is unconditionally guaranteed as a full faith and
credit obligation of the United States of America; or
o a combination of the foregoing that, in each case, is sufficient, in
the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, interest and premium, if any,
on the outstanding debt securities of the applicable series on their
stated maturity or applicable redemption date, as the case may be,
and any mandatory sinking fund payments applicable to that
particular series of the debt securities on the day on which the
payments are due;
o we must deliver to the trustee an opinion of counsel confirming that
the holders of the outstanding securities of the applicable series
will not recognize income, gain or loss for federal income tax
purposes as a result of the defeasance;
o no default or event of default shall have occurred and be continuing
on the date of the deposit of the amounts to be held in trust for
the benefit of the holders (other than a default or event of default
resulting from the borrowing of funds to be applied to the deposit)
or in the case of any insolvency-related defaults, at any time in
the period ending on the 91st day after the date of the deposit (or
greater period of time in which any such deposit of trust funds may
remain subject to bankruptcy or insolvency laws which apply to the
deposit by us); and
o we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent
provided for or relating to legal defeasance or covenant defeasance,
as the case may be, have been complied with.
After satisfying the conditions for legal defeasance, the applicable
debt securities will be deemed outstanding only for limited purposes as more
fully set forth in the relevant indenture. After legal defeasance, the holders
of outstanding debt securities will have to rely solely on the deposits we make
to the trust for repayment on the debt securities.
After satisfying the conditions for covenant defeasance, the debt
securities of the applicable series will be deemed not outstanding for the
purposes of the covenants from which we have been released, but will continue to
be deemed outstanding for all other purposes under the relevant indenture.
The applicable prospectus supplement may further describe additional
provisions, if any, permitting legal defeasance or covenant defeasance,
including any modifications to the provisions described above, with respect to
the debt securities of or within a particular series.
Information Concerning the Trustee. The prospectus supplement with
respect to particular debt securities will describe any relationship that we may
have with the trustee for the debt securities offered. We may also maintain bank
accounts, borrow money and have other customary banking or investment banking
relationships with the trustee, or its affiliates, in the ordinary course of
business.
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Form, Exchange, Transfer. Unless otherwise specified in the prospectus
supplement, debt securities will be issued in registered form without coupons.
They may also be issued in global form with accompanying book-entry procedures
as outlined below.
A holder of debt securities of any series can exchange the debt
securities for other debt securities of the same series, in any authorized
denomination and with the same terms and aggregate principal amount. They are
transferable at the corporate trust office of the trustee or at any transfer
agent designated by us for that purpose. No service charge will be made for any
transfer or exchange of the debt securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
with a transfer or exchange, other than exchanges not involving any transfer,
like the issuance of definitive securities in replacement of temporary
securities or the issuance of new securities upon surrender of a security that
is redeemed or purchased in part.
Global Securities. The registered debt securities may be issued in the
form of one or more fully registered global securities that will be deposited
with and registered in the name of a depositary or with a nominee for a
depositary identified in the prospectus supplement.
The specific terms of the depositary arrangement with respect to any
debt securities to be represented by a registered global security will be
described in the prospectus supplement.
Ownership of beneficial interests in a registered global security will
be limited to persons that have accounts with the depositary for such registered
global security ("participants") or persons that may hold interests through
participants. Upon the issuance of a registered global security, the depositary
will credit, on its book-entry registration and transfer system, the
participants' accounts with the principal amounts of the debt securities
represented by the registered global security beneficially owned by such
participants. Ownership of beneficial interests in such registered global
security will be shown on, and the transfer of such ownership interests will be
effected, only through records maintained by the depositary for such registered
global security or on the records of participants for interests of persons
holding through participants.
So long as the depositary for a registered global security, or its
nominee, is the registered owner of a registered global security, the depositary
or the nominee will be considered the sole owner or holder of the debt
securities represented by the registered global security for all purposes.
Except as set forth below, owners of beneficial interests in a registered global
security will not:
o be entitled to have the debt securities represented by such
registered global security registered in their names;
o receive or be entitled to receive physical delivery of such debt
securities in definitive forms; and
o be considered the owners or holders of the debt securities.
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Accordingly, each person owning a beneficial interest in a registered
global security must rely on the procedures of the depositary for such
registered global security and, if such person is not a participant, on the
procedures of the participant through which such person owns its interest, to
exercise any rights of a holder under the applicable indenture. We understand
that under existing industry practices, if we request any action of holders, or
if an owner of a beneficial interest in a registered global security desires to
take any action which a holder is entitled to take under the applicable
indenture, the depositary would authorize the participants holding the relevant
beneficial interests to take such action, and such participants would authorize
beneficial owners owning through such participants to take such action.
Principal, premium, if any, and interest payments on debt securities
represented by a registered global security registered in the name of a
depositary or its nominee will be made to such depositary or its nominee, as the
case may be, as the registered owner of such registered global security. Neither
we nor the trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial ownership
interests in such registered global security.
We expect that the depositary for any debt securities represented by a
registered global security, upon receipt of any payment of principal, premium or
interest will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such registered global
security as shown on the records of such depositary. We also expect that
payments by participants to owners of beneficial interests in such a registered
global security held by the participants will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name."
We may at any time determine not to have any of the debt securities of
a series represented by one or more registered global securities and, in such
event, will issue debt securities of such series in definitive form in exchange
for all of the registered global security or securities representing such debt
securities. Any debt securities issued in definitive form in exchange for a
registered global security will be registered in such name or names as the
depositary shall instruct the relevant trustee. We expect that such instructions
will be based upon directions received by the depositary from participants with
respect to ownership of beneficial interests in such registered global security.
If provided in a prospectus supplement relating to a series of debt
securities, the debt securities of that series may also be issued in the form of
one or more global securities that will be deposited with a common depositary
identified in the prospectus supplement. The specific terms and procedures,
including the specific terms of the depositary arrangement, with respect to any
portion of a series of debt securities to be represented by a global security
will be described in the prospectus supplement.
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Particular Terms of the Senior Debt Securities
Ranking of Senior Debt Securities. The senior debt securities will
constitute part of our senior debt and rank equally with all our other senior
and unsecured debt. The senior debt securities will be senior to our senior
subordinated debt and subordinated debt.
Events of Default. The following are events of default under a series
of senior debt securities:
o we fail to pay the principal, any premium, if any, or any sinking
fund payment, on any senior debt securities of that series when due;
o we fail to pay interest on any senior debt securities of that series
within 30 days following the due date;
o we fail to observe or perform any other covenant, representation,
warranty or other agreement in the senior indenture applicable to
that series and that failure continues for 60 days after we receive
notice to comply from the trustee or holders of at least 25% in
aggregate principal amount of the outstanding senior debt securities
of all series affected by that failure, treating all those series as
a single class;
o certain events of bankruptcy or insolvency occur, whether voluntary
or not.
The prospectus supplement for a particular series may describe
additional or different events of default that apply to that series. An event of
default with respect to one series of senior debt securities does not
necessarily constitute an event of default with respect to any other series of
senior debt securities.
If a default or an event of default occurs and is continuing, and if a
responsible officer of the trustee under the indenture has actual knowledge
thereof, the trustee will mail to the holders of senior debt securities of the
affected series a notice to that effect within 90 days after it occurs. Except
in the case of a default in the payment of principal or interest, the trustee
under the senior indenture may withhold notice if and so long as a committee of
the trustee's responsible officers in good faith determines that withholding the
notice is in the interests of the holders.
If an event of default with respect to one or more series of senior
debt securities occurs and is continuing, the trustee or the holders of at least
25% in aggregate principal amount of the then outstanding senior debt securities
of all series with respect to which the event of default occurs and is
continuing, treating all those series as a single class, may declare the
principal of, premium, if any, and accrued and unpaid interest of all the senior
debt securities of those series to be immediately due and payable. The holders
of a majority in aggregate principal amount of the then outstanding senior debt
securities of all series covered by such declaration may annul or rescind the
declaration and any related payment default that resulted from the declaration
but not any other payment default. Certain events of bankruptcy and insolvency
will result in all outstanding series of senior debt securities becoming due and
payable immediately without any further action on the part of the trustee or the
holders.
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The senior indenture entitles the trustee to be indemnified by the
holders before proceeding to exercise any right or power at the request of any
of the holders.
The holders of a majority in principal amount of the outstanding senior
debt securities of all series with respect to which an event of default occurs
and is continuing, treating all those series as a single class, may direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or exercising any trust power conferred on it, except that:
o the direction cannot conflict with any law or regulation or the
indenture;
o the trustee may take any other action deemed proper by the trustee
which is not inconsistent with the direction; and
o the trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the holders of the
senior debt securities not joining in the action.
A holder may pursue a remedy directly under the indenture or the series
of senior debt securities, but before doing so, the following must occur:
o the holder must give to the trustee written notice that an event of
default has occurred and is continuing;
o the holders of at least 25% in principal amount of the then
outstanding senior debt securities of all affected series, treating
all those series as a single class, must make a written request to
the trustee to pursue the remedy;
o the holder, or holders, must offer and, if requested, provide to the
trustee an indemnity satisfactory to the trustee against any loss,
liability or expense from the taking of the action;
o the trustee does not comply with the request within 60 days after
receipt of the request and offer and, if requested, the provision of
indemnity; and
o during the 60 day period, the holders of a majority in principal
amount of the then outstanding senior debt securities of all those
series, treating all those series as a single class, do not give the
trustee a direction inconsistent with the written request.
However, holders have an absolute right to receipt of principal,
premium, if any, and interest on or after the respective due dates and to
institute suit for the enforcement of those payments. The right of a holder of
senior debt securities to bring suit for the enforcement of any payments of
principal, premium, if any, and interest on senior debt securities on or after
the respective due dates may not be impaired or affected without the consent of
that holder.
The holders of a majority in principal amount of the senior debt
securities then outstanding of all affected series, treating all such series as
a single class, may by notice to the trustee on behalf of all holders of the
senior debt securities of such series waive any past defaults, except:
o a continuing default in payment of the principal of, premium, if
any, or interest on, or any sinking fund payment on, senior debt
securities of the series; and
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o a continuing default in respect of a covenant or provision of the
indenture which cannot be amended or modified without the consent of
each holder of senior debt securities affected.
We will periodically file statements with the trustees regarding our
compliance with covenants in the senior indenture.
Modifications and Amendments. Except as provided below, or more fully
specified in the senior indenture, the senior indenture may be amended or
supplemented by us and the trustee with the consent of holders of a majority in
principal amount of all series of senior debt securities affected by the
amendment or supplement, treating all such series as a single class. In
addition, the record holders of a majority in principal amount of the
outstanding senior debt securities of all series affected by the waiver,
treating all such series as a single class, may, with respect to those series,
waive defaults under, or compliance with, the provisions of the senior
indenture. However, some amendments or waivers require the consent of each
holder of any senior debt security affected. Without the consent of each holder,
an amendment or waiver may not:
o reduce the principal amount of the senior debt securities of any
series whose holders must consent to an amendment, supplement or
waiver;
o reduce the principal or change the fixed maturity of the principal
of, premium, if any, or mandatory sinking fund obligation, if any,
of any senior debt securities of any series or alter the provisions
with respect to the redemption of the senior debt securities;
o reduce the rate, or change the time for payment, of interest,
including default interest, on any senior debt security of any
series;
o waive a default or event of default in the payment of principal of,
or interest or premium on, the senior debt securities of any series,
except a rescission of acceleration of the senior debt securities by
the holders of a majority in aggregate principal amount of the
senior debt securities of any series and a waiver of the payment
default that resulted from that acceleration;
o make any senior debt security of any series payable in currency
other than that stated in the senior debt securities of that series;
o make any change in the provisions of the senior indenture relating
to waivers of past defaults or the rights of the holders of senior
debt securities to receive payments of principal of or interest or
premium on the senior debt securities;
o waive a redemption payment with respect to any senior debt security;
o make any change in the right of any holders of senior debt
securities regarding waivers of defaults or impair or affect the
right of any holder of a senior debt security of any series to
receive payment of principal, premium, if any, and interest on that
security on or after the due date expressed in that security or to
bring suit for the enforcement of any payment on or after the due
date; or
o make any change in the above amendment and waiver provisions.
We and the trustee under the senior indenture may amend or supplement
the senior indenture or the senior debt securities issued thereunder without the
consent of any holder:
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o to evidence the succession of another person to us, or successive
successions, and the assumption by the successors of our covenants,
agreements and obligations under the indenture;
o to add other covenants, restrictions or conditions for the
protection of the holders of all or any series of senior debt
securities;
o to add events of default;
o to provide for the issuance of senior debt securities in coupon form
and to provide for exchangeability of those senior debt securities
under the indenture in fully registered form;
o to provide for the issuance of and to establish the form, terms and
conditions of senior debt securities of any series;
o to evidence and provide for the acceptance of appointment by a
successor trustee and to add or change any of the provisions of the
indenture necessary to provide for or facilitate the administration
of the trusts under the indenture by more than one trustee;
o to cure any ambiguity, or to correct or supplement any provision in
the indenture which may be defective or inconsistent with any other
provision contained in the indenture or in any supplemental
indenture, or to make any other provisions with respect to matters
or questions arising under that indenture, so long as the interests
of holders of senior debt securities of any series are not adversely
affected in any material respect under that indenture; or
o to make any change that does not adversely affect the rights of any
holder.
Particular Terms of the Senior Subordinated Debt Securities
Ranking of Senior Subordinated Debt Securities. The senior subordinated
debt securities will rank senior to any subordinated debt securities and will be
subordinated and junior in right of payment to any senior debt securities issued
by us, as well as certain other indebtedness incurred by us to the extent set
forth in the applicable indenture. All series of the senior subordinated debt
securities will rank equally with each other.
Subordination. Unless the prospectus supplement indicates otherwise,
the following provisions will apply to the senior subordinated debt securities.
Our obligations under the senior subordinated debt securities will be
subordinated in right of payment to our obligations under our senior debt. For
this purpose, "senior debt" generally includes any indebtedness that does not
expressly provide that it is on a parity with or subordinated in right of
payment to the senior subordinated debt securities. Specifically, senior debt
includes obligations under any credit facility with banks or other institutional
lenders and obligations under the senior debt securities described in this
prospectus. Senior debt will not include:
o any liability for federal, state, local or other taxes;
o any indebtedness to any of our subsidiaries or other affiliates;
o any trade payables;
o any indebtedness that we may incur in violation of the senior
subordinated indenture; or
o obligations under any subordinated debt securities.
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If we distribute our assets to creditors upon any dissolution,
winding-up, liquidation or reorganization or in bankruptcy, insolvency,
receivership or similar proceedings, we must first pay all amounts due or to
become due on all senior debt before we pay the principal of, or any premium or
interest on, the senior subordinated debt securities.
We may not make any payment on the senior subordinated debt securities
if a default in the payment of the principal, premium, if any, interest or other
obligations, including a default under any repurchase or redemption obligation
in respect of designated senior debt, occurs and continues beyond any applicable
grace period. We may not make any payment on the senior subordinated debt
securities if any other default occurs and continues with respect to designated
senior debt that permits holders of the designated senior debt to accelerate its
maturity and the trustee receives a notice of default from us, a holder of
designated senior debt or other person permitted to give notice. We may not
resume payments on the senior subordinated debt securities until the defaults
are cured or specified time periods pass, unless the maturity of the senior debt
is actually accelerated.
The term "designated senior debt" means our obligations under any
particular senior debt if the amount of that senior debt is at least the amount
specified in the applicable prospectus supplement and the debt instrument
expressly provides that the senior debt will be designated senior debt with
respect to the senior subordinated debt securities.
We expect that the terms of some of our senior debt will provide that
an event of default under the senior subordinated debt securities or an
acceleration of their maturity will constitute an event of default under the
senior debt. In that case, if the maturity of the senior subordinated debt
securities is accelerated because of an event of default, we may not make any
payment on the senior subordinated debt securities until we have paid all senior
debt or the acceleration has been rescinded. If the payment of the senior
subordinated debt securities is accelerated because of an event of default, we
must promptly notify the holders of senior debt of the acceleration.
If we experience a bankruptcy, dissolution or reorganization, holders
of senior debt may receive more, ratably, and holders of the senior subordinated
debt securities may receive less, ratably, than our other creditors.
The indenture for senior subordinated debt securities may not limit our
ability to incur additional senior debt.
The subordination provisions may not be amended in a manner adverse to
the holders of the senior subordinated debt securities without the consent of
the holders of at least 75% of the aggregate principal amount of senior
subordinated debt securities then outstanding affected by the amendment, voting
as a single class.
Events of Default. The following are events of default under a series
of senior subordinated debt securities:
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o we fail to pay the principal, any premium, if any, or any sinking
fund payment, on any senior subordinated debt securities of that
series when due;
o we fail to pay interest on any senior subordinated debt securities
of that series within 30 days following the due date;
o we fail to observe or perform any other covenant, representation,
warranty or other agreement in the senior subordinated indenture
applicable to that series and that failure continues for 60 days
after we receive notice to comply from the trustee or holders of at
least 25% in aggregate principal amount of the outstanding senior
subordinated debt securities of all series affected by that failure,
treating all those series as a single class;
o certain events of bankruptcy or insolvency occur, whether voluntary
or not.
The prospectus supplement for a particular series may describe
additional or different events of default that apply to that series. An event of
default with respect to one series of senior subordinated debt securities does
not necessarily constitute an event of default with respect to any other series
of senior subordinated debt securities.
If a default or an event of default occurs and is continuing, and if a
responsible officer of the trustee under the indenture has actual knowledge
thereof, the trustee will mail to the holders of senior subordinated debt
securities of the affected series a notice to that effect within 90 days after
it occurs. Except in the case of a default in the payment of principal or
interest, the trustee under the senior subordinated indenture may withhold
notice if and so long as a committee of the trustee's responsible officers in
good faith determines that withholding the notice is in the interests of the
holders.
If an event of default with respect to one or more series of senior
subordinated debt securities occurs and is continuing, the trustee or the
holders of at least 25% in aggregate principal amount of the then outstanding
senior subordinated debt securities of all series with respect to which the
event of default occurs and is continuing, treating all those series as a single
class, may declare the principal of, premium, if any, and accrued and unpaid
interest (subject to applicable subordination provisions in the senior
subordinated indenture) of all the senior subordinated debt securities of those
series to be immediately due and payable. The holders of a majority in aggregate
principal amount of the then outstanding senior subordinated debt securities of
all series covered by such declaration may annul and rescind the declaration and
any related payment default that resulted from the declaration but not any other
payment default. Certain events of bankruptcy and insolvency will result in all
outstanding series of senior subordinated debt securities becoming due and
payable immediately without any further action on the part of the trustee or the
holders.
The senior subordinated indenture entitles the trustee to be
indemnified by the holders before proceeding to exercise any right or power at
the request of any of the holders.
The holders of a majority in principal amount of the outstanding senior
subordinated debt securities of all series with respect to which an event of
default occurs and is continuing, treating all those series as a single class,
may direct the time, method and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust power conferred on it,
except that:
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o the direction cannot conflict with any law or regulation or the
indenture;
o the trustee may take any other action deemed proper by the trustee
which is not inconsistent with the direction; and
o the trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the holders of the
senior subordinated debt securities not joining in the action.
A holder may pursue a remedy directly under the senior subordinated
indenture or the series of senior subordinated debt securities, but before doing
so, the following must occur:
o the holder must give to the trustee written notice that an event of
default has occurred and is continuing;
o the holders of at least 25% in principal amount of the then
outstanding senior subordinated debt securities of all affected
series, treating all those series as a single class, must make a
written request to the trustee to pursue the remedy;
o the holder, or holders, must offer and, if requested, provide to the
trustee an indemnity satisfactory to the trustee against any loss,
liability or expense from the taking of the action;
o the trustee does not comply with the request within 60 days after
receipt of the request and offer and, if requested, the provision of
indemnity; and
o during the 60 day period, the holders of a majority in principal
amount of the then outstanding senior subordinated debt securities
of all those series, treating all those series as a single class, do
not give the trustee a direction inconsistent with the written
request.
However, holders have an absolute right to receipt of principal,
premium, if any, and interest on or after the respective due dates and to
institute suit for the enforcement of those payments. The right of a holder of
senior subordinated debt securities to bring suit for the enforcement of any
payments of principal, premium, if any, and interest on senior subordinated debt
securities on or after the respective due dates, without regard to acceleration
or default, may not be impaired or affected without the consent of that holder.
The holders of a majority in principal amount of the senior
subordinated debt securities then outstanding of all affected series, treating
all such series as a single class, may by notice to the trustee on behalf of all
holders of the senior subordinated debt securities of such series waive any past
defaults, except:
o a continuing default in payment of the principal of, premium, if
any, or interest on, or any sinking fund payment on, senior
subordinated debt securities of the series; and
o a continuing default in respect of a covenant or provision of the
indenture which cannot be amended or modified without the consent of
each holder of senior subordinated debt securities affected.
- 38 -
We will periodically file statements with the trustees regarding our
compliance with covenants in the senior subordinated indenture.
Modifications and Amendments. Except as provided below, or more fully
specified in the senior subordinated indenture, the senior subordinated
indenture may be amended or supplemented by us and the trustee with the consent
of holders of a majority in principal amount of all series of senior
subordinated debt securities affected by the amendment or supplement, treating
all such series as a single class. In addition, the record holders of a majority
in principal amount of the outstanding senior subordinated debt securities of
all series affected by the waiver, treating all such series as a single class,
may, with respect to those series, waive defaults under, or compliance with, the
provisions of the senior subordinated indenture. However, some amendments or
waivers require the consent of each holder of any senior subordinated debt
security affected. Without the consent of each holder, an amendment or waiver
may not:
o reduce the principal amount of the senior subordinated debt
securities of any series whose holders must consent to an amendment,
supplement or waiver;
o reduce the principal or change the fixed maturity of the principal
of, premium, if any, or mandatory sinking fund obligation, if any,
of any senior subordinated debt securities of any series or alter
the provisions with respect to the redemption of the senior
subordinated debt securities;
o reduce the rate, or change the time for payment, of interest,
including default interest, on any senior subordinated debt security
of any series;
o waive a default or event of default in the payment of principal of,
or interest or premium on, the senior subordinated debt securities
of any series, except a rescission of acceleration of the senior
subordinated debt securities by the holders of a majority in
aggregate principal amount of the senior subordinated debt
securities of any series and a waiver of the payment default that
resulted from that acceleration;
o make any senior subordinated debt security of any series payable in
currency other than that stated in the senior subordinated debt
securities of that series;
o make any change in the provisions of the senior subordinated
indenture relating to waivers of past defaults or the rights of the
holders of senior subordinated debt securities to receive payments
of principal of or interest or premium on the senior subordinated
debt securities;
o waive a redemption payment with respect to any senior subordinated
debt security;
o make any change in the right of any holders of senior subordinated
debt securities regarding waivers of defaults or impair or affect
the right of any holder of a senior subordinated debt security of
any series to receive payment of principal, premium, if any, and
interest on that security on or after the due date expressed,
without regard to acceleration or default, in that security or to
bring suit for the enforcement of any payment on or after the due
date; or
o make any change in the above amendment and waiver provisions.
- 39 -
We and the trustee under the senior subordinated indenture may amend or
supplement the senior subordinated indenture or the senior subordinated debt
securities issued thereunder without the consent of any holder:
o to evidence the succession of another person to us, or successive
successions, and the assumption by the successors of our covenants,
agreements and obligations under the senior subordinated indenture;
o to add other covenants, restrictions or conditions for the
protection of the holders of all or any series of senior
subordinated debt securities;
o to add events of default;
o to provide for the issuance of senior subordinated debt securities
in coupon form and to provide for exchangeability of those senior
subordinated debt securities under the indenture in fully registered
form;
o to provide for the issuance of and to establish the form, terms and
conditions of senior subordinated debt securities of any series;
o to evidence and provide for the acceptance of appointment by a
successor trustee and to add or change any of the provisions of the
indenture necessary to provide for or facilitate the administration
of the trusts under the indenture by more than one trustee;
o to cure any ambiguity, or to correct or supplement any provision in
the indenture which may be defective or inconsistent with any other
provision contained in the indenture or in any supplemental
indenture, or to make any other provisions with respect to matters
or questions arising under that indenture, so long as the interests
of holders of senior subordinated debt securities of any series are
not adversely affected in any material respect under that indenture;
or
o to make any change that does not adversely affect the rights of any
holder.
Particular Terms of the Subordinated Debt Securities
Ranking of Subordinated Debt Securities. The subordinated debt
securities will be subordinated and junior in right of payment to any senior
debt securities and senior subordinated debt securities issued by us, as well as
certain other indebtedness incurred by us to the extent set forth in the
prospectus supplement.
Subordination. Unless the prospectus supplement indicates otherwise,
the subordination provisions of the subordinated debt securities will be the
same as those of the senior subordinated debt securities just described, with
the following exceptions:
o "Senior debt" will include our obligations under the senior
subordinated debt securities, as well as under the other debt
specified above; and
o Different series of subordinated debt securities may rank senior to
other series. In that case, our obligations under the higher-ranking
series of subordinated debt will be "senior debt" in relation to the
lower-ranking series.
Events of Default. The following are events of default under a series
of subordinated debt securities:
- 40 -
o we fail to pay the principal, any premium, if any, or any sinking
fund payment, on any subordinated debt securities of that series
when due;
o we fail to pay interest on any subordinated debt securities of that
series within 30 days following the due date;
o we fail to observe or perform any other covenant, representation,
warranty or other agreement in the subordinated indenture applicable
to that series and that failure continues for 60 days after we
receive notice to comply from the trustee or holders of at least 25%
in aggregate principal amount of the outstanding subordinated debt
securities of that series and all other series that rank equal with
that series and with respect to which that default has occurred,
treating all those series as a single class;
o certain events of bankruptcy or insolvency occur, whether voluntary
or not.
The prospectus supplement for a particular series may describe
additional or different events of default that apply to that series. An event of
default with respect to one series of subordinated debt securities does not
necessarily constitute an event of default with respect to any other series of
subordinated debt securities.
If a default or an event of default occurs and is continuing, and if a
responsible officer of the trustee under the indenture has actual knowledge
thereof, the trustee will mail to the holders of subordinated debt securities of
the affected series a notice to that effect within 90 days after it occurs.
Except in the case of a default in the payment of principal or interest, the
trustee under the subordinated indenture may withhold notice if and so long as a
committee of the trustee's responsible officers in good faith determines that
withholding the notice is in the interests of the holders.
If an event of default with respect to any series of subordinated debt
securities occurs and is continuing, the trustee or the holders of at least 25%
in aggregate principal amount of the then outstanding subordinated debt
securities of that series and all other series that rank equal with that series
and with respect to which the event of default occurs and is continuing,
treating all those series as a single class, may declare the principal of,
premium, if any, and accrued and unpaid interest (subject to applicable
subordination provisions in the relevant indenture) of all the subordinated debt
securities of those series to be immediately due and payable. The holders of a
majority in aggregate principal amount of the then outstanding subordinated debt
securities of all series covered by such declaration may annul and rescind the
declaration and any related payment default that resulted from the declaration
but not any other payment default. Certain events of bankruptcy and insolvency
will result in all outstanding series of subordinated debt securities becoming
due and payable immediately without any further action on the part of the
trustee or the holders.
The subordinated indenture entitles the trustee to be indemnified by
the holders before proceeding to exercise any right or power at the request of
any of the holders.
The holders of a majority in principal amount of the outstanding
subordinated debt securities of all series with respect to which an event of
default occurs and is continuing and that rank equal with each other, treating
all those series as a single class, may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or exercising
any trust power conferred on it with respect to those series, except that:
- 41 -
o the direction cannot conflict with any law or regulation or the
subordinated indenture;
o the trustee may take any other action deemed proper by the trustee
which is not inconsistent with the direction; and
o the trustee need not take any action which might involve it in
personal liability or be unduly prejudicial to the holders of the
subordinated debt securities not joining in the action.
A holder may pursue a remedy directly under the indenture or the series
of subordinated debt securities, but before doing so, the following must occur:
o the holder must give to the trustee written notice that an event of
default has occurred and is continuing;
o the holders of at least 25% in principal amount of the then
outstanding subordinated debt securities of all affected series that
rank equal with each other, treating all those securities as a
single class, must make a written request to the trustee to pursue
the remedy;
o the holder, or holders, must offer and, if requested, provide to the
trustee an indemnity satisfactory to the trustee against any loss,
liability or expense from the taking of the action;
o the trustee does not comply with the request within 60 days after
receipt of the request and offer and, if requested, the provision of
indemnity; and
o during the 60 day period, the holders of a majority in principal
amount of the then outstanding subordinated debt securities of all
those series, treating all those securities as a single class, do
not give the trustee a direction inconsistent with the written
request.
However, holders have an absolute right to receipt of principal,
premium, if any, and interest on or after the respective due dates and to
institute suit for the enforcement of those payments. The right of a holder of
subordinated debt securities to bring suit for the enforcement of any payments
of principal, premium, if any, and interest on subordinated debt securities on
or after the respective due dates may not be impaired or affected without the
consent of that holder.
The holders of a majority in principal amount of the subordinated debt
securities then outstanding of all affected series that rank equal with each
other, treating all such series as a single class, may by notice to the trustee
on behalf of all holders of the subordinated debt securities of such series
waive any past defaults, except:
o a continuing default in payment of the principal of, premium, if
any, or interest on, or any sinking fund payment on, subordinated
debt securities of the series; and
- 42 -
o a continuing default in respect of a covenant or provision of the
indenture which cannot be amended or modified without the consent of
each holder of each debt securities affected.
We will periodically file statements with the trustee regarding our
compliance with covenants in the subordinated indenture.
Modifications and Amendments. Except as provided below, or more fully
specified in the subordinated indenture, the subordinated indenture may be
amended or supplemented by us and the trustee with the consent of holders of a
majority in principal amount of each series of debt securities affected by the
amendment or supplement, that rank equal with each other, treating all such
series as a single class. In addition, the record holders of a majority in
principal amount of the outstanding subordinated debt securities of all series
affected by the waiver that rank equal with each other, treating all such series
as a single class, may, with respect to those series, waive defaults under, or
compliance with, the provisions of the subordinated indenture. However, some
amendments or waivers require the consent of each holder of any subordinated
debt security affected. Without the consent of each holder, an amendment or
waiver may not:
o reduce the principal amount of the subordinated debt securities of
any series whose holders must consent to an amendment, supplement or
waiver;
o reduce the principal or change the fixed maturity of the principal
of, premium, if any, or mandatory sinking fund obligation if any, of
any subordinated debt securities of any series or alter the
provisions with respect to the redemption of the subordinated debt
securities;
o reduce the rate, or change the time for payment, of interest,
including default interest, on any subordinated debt security of any
series;
o waive a default or event of default in the payment of principal of,
or interest or premium on, the subordinated debt securities of any
series, except a rescission of acceleration of the subordinated debt
securities by the holders of a majority in aggregate principal
amount of the subordinated debt securities of any series and a
waiver of the payment default that resulted from that acceleration;
o make any subordinated debt security of any series payable in
currency other than that stated in the debt securities of that
series;
o make any change in the provisions of the subordinated indenture
relating to waivers of past defaults or the rights of the holders of
subordinated debt securities to receive payments of principal of or
interest or premium on the subordinated debt securities;
o waive a redemption payment with respect to any subordinated debt
security;
o make any change in the right of any holders of subordinated debt
securities regarding waivers of defaults or impair or affect the
right of any holder of a subordinated debt security of any series to
receive payment of principal, premium, if any, and interest on that
security on or after the due date expressed in that security or to
bring suit for the enforcement of any payment on or after the due
date; or
o make any change in the above amendment and waiver provisions.
- 43 -
We and the trustee under the subordinated indenture may amend or
supplement the indenture or the debt securities issued thereunder without the
consent of any holder:
o to evidence the succession of another person to us, or successive
successions, and the assumption by the successors of our covenants,
agreements and obligations under the subordinated indenture;
o to add other covenants, restrictions or conditions for the
protection of the holders of all or any series of subordinated debt
securities;
o to add events of default;
o to provide for the issuance of subordinated debt securities in
coupon form and to provide for exchangeability of those subordinated
debt securities under the indenture in fully registered form;
o to provide for the issuance of and to establish the form, terms and
conditions of subordinated debt securities of any series;
o to evidence and provide for the acceptance of appointment by a
successor trustee and to add or change any of the provisions of the
indenture necessary to provide for or facilitate the administration
of the trusts under the indenture by more than one trustee;
o to cure any ambiguity, or to correct or supplement any provision in
the indenture which may be defective or inconsistent with any other
provision contained in the indenture or in any supplemental
indenture, or to make any other provisions with respect to matters
or questions arising under that indenture, so long as the interests
of holders of debt securities of any series are not adversely
affected in any material respect under that indenture; or
o to make any change that does not adversely affect the rights of any
holder.
For the purpose of amending or supplementing our subordinated
indenture, or waving a default under or compliance with the provisions of the
subordinated indenture, debt securities that are convertible into equity
securities and debt securities that are not so convertible shall not be treated
as part of the same class notwithstanding that such debt securities may
otherwise rank equal with each other.
- 44 -
DESCRIPTION OF WARRANTS
The following description describes the general terms and provisions of
the warrants to which any prospectus supplement may relate. The prospectus
supplement relating to the warrants will describe the particular terms of the
warrants and the extent, if any, to which these general provisions may apply to
the warrants offered.
We may issue warrants to purchase shares, preferred shares, senior debt
securities, senior subordinated debt securities, subordinated debt securities or
any combination thereof. The warrants may be issued independently or together
with any other securities and may be attached or separate from the other
securities. Each series of warrants will be issued under a separate warrant
agreement to be entered into between a warrant agent and us. The warrant agent
will act solely as our agent in connection with the warrants of any series and
will not assume any obligation or relationship of agency for or with holders or
beneficial owners of the warrants.
The applicable prospectus supplement will describe the terms of any
warrants and the related offering in respect of which this prospectus is being
delivered, including the following:
o the title of the warrants;
o the aggregate number of the warrants;
o the price or prices at which the warrants will be issued;
o the designation and terms of the underlying securities purchasable
upon exercise of the warrants and the number of such underlying
securities issuable upon exercise of the warrants;
o the price or prices at which the securities underlying the warrants
may be purchased;
o the date on which the right to exercise the warrants shall commence
and the date on which the right shall expire;
o whether the warrants will be issued in registered form or bearer
form;
o if applicable, the minimum or maximum amount of the warrants which
may be exercised at any one time;
o if applicable, the designation and terms of the other securities
with which the warrants are issued and the number of such warrants
issued with each such underlying warrant security;
o if applicable, the date on and after which the warrants and other
securities will be separately transferable;
o information with respect to book-entry procedures, if any;
o if applicable, a discussion of certain United States federal income
tax considerations;
o the procedures and conditions relating to the exercise of the
warrants; and
o any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
- 45 -
DESCRIPTION OF UNITS
We may issue units consisting of shares, preferred shares, debt
securities, warrants or any combination of those securities. The applicable
prospectus supplement will describe the terms of any units including the
following:
o the terms of the units and each of the securities included in the
units, including whether and under what circumstances the securities
included in the units may or may not be traded separately;
o the terms of any unit agreement governing the units;
o if applicable, a discussion of certain United Stated federal income
tax considerations; and
o the provisions for the payment, settlement, transfer or exchange of
the units.
- 46 -
SUMMARY OF THE TRUST AGREEMENT
The following summary of our Trust Agreement is qualified in its
entirety by reference to the Trust Agreement.
Trustees
Our Trustees are divided into three classes, with each member of a
class elected for a term of three years and until his successor is duly elected
and qualified. The Trust Agreement provides that there will be not fewer than
five nor more than 15 Trustees. The Trustees are not required to furnish a bond.
Trustees may resign at any time, but no resignation is effective until a
successor is elected if its effect would be to reduce the number of Trustees
below five. The Trustees may fill vacancies that shall have occurred as a result
of an increase in the number of Trustees or by reason of the death, resignation
or incapacity of any of the Trustees. A Trustee chosen by the other Trustees to
fill a vacancy that has occurred as a result of an increase in the number of
Trustees will serve until the next annual or special meeting of shareholders and
until his successor is elected and qualified. A Trustee chosen by other trustees
to fill a vacancy created by reason of the death, resignation or incapacity of a
Trustee will hold office for the full remaining term of the former Trustee and
until his successor is elected and qualified. The Trust Agreement does not
provide for cumulative voting in the election of Trustees, and the candidates
receiving the highest number of votes are elected to the office of Trustee. The
shareholders may also elect Trustees to fill a vacancy that the other Trustees
have not filled. Two-thirds of the serving Trustees have the right at any time
to remove any of their number, including a Trustee elected by the shareholders,
for any cause deemed by them to be sufficient. Any Trustee may be removed for
cause by the holders of a majority of the outstanding shares then outstanding
and entitled to vote. A vacancy created by the removal of a Trustee by the other
Trustees may be filled only by the shareholders at their next annual meeting or
a special meeting called for that purpose unless there are fewer than five
Trustees, in which case the remaining Trustees are required to elect a
sufficient number of persons so that at least five will be serving. Regular
meetings of the shareholders are held annually, and special meetings of the
shareholders may be called upon proper notice.
The concurrence of a majority of the Trustees present at any meeting
where there is a quorum, or the written consent of a majority of the Trustees
then serving, is necessary for the validity of any action taken. In no event may
action be taken without the concurrence, at a meeting or by consent in writing,
of at least four Trustees. A majority of the Trustees, provided that the
majority consists of at least four Trustees, constitutes a quorum.
The Trustees may hold legal title to our properties on our behalf or
designate persons to so hold on our behalf. The Trustees have complete control
of the conduct of our business, including investments, sales, leasing, issuance
of additional shares, borrowing and distributions to shareholders without the
necessity of securing shareholder approval.
Indemnification
Our Trust Agreement, as amended, provides that:
- 47 -
o no Trustee shall be personally liable to any person or entity for
any of our acts, omissions or obligations;
o no Trustee shall be personally liable for monetary damages for any
action, or any failure to act, except to the extent a Pennsylvania
business corporation's director would remain liable under the
provisions of 15 Pa. CS Section 1713; and
o no officer who performs his duties in good faith, in a manner
reasonably believed to be in our best interests and with the care,
skill and diligence a person of ordinary prudence would use will be
liable by reason of having been an officer.
Our Trust Agreement provides also that every Trustee and officer is
entitled as of right to be indemnified by us against reasonable expense
(including attorney's fees) and any liability, loss, judgment, excise tax, fine,
penalties, and settlements they pay or incur in connection with an actual
(whether pending or completed) or threatened claim, action, suit or proceeding,
civil, criminal, administrative, investigative or other, whether brought by or
in our right or otherwise, in which he or she may be involved, as a party or
otherwise, by reason of being or having been a Trustee or officer or because the
person is or was serving in any capacity at our request as a trustee, director,
officer, employee, agent, partner, fiduciary or other representative of another
real estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or other entity provided, however, that:
o no right of indemnification will exist with respect to an action
brought by a Trustee or officer against us; and
o no indemnification will be made in any case where the act or failure
to act giving rise to the claim for indemnification is determined by
the final judgment of a court of competent jurisdiction to have
constituted willful misconduct or recklessness.
The right to indemnification is contractual in nature and includes the
right to be paid in advance the expenses incurred in connection with any
proceedings; provided, however, that advance payments must be made in accordance
with applicable law and must be accompanied by an undertaking by or on behalf of
the applicable Trustee or officer to repay all amounts so advanced if it is
determined ultimately that the applicable Trustee or officer is not entitled to
indemnification under the Trust Agreement.
Transactions with Trustees
The Trustees may deal with us by rendering services for reasonable
compensation, buying property from or selling property to us or otherwise. No
Trustee shall have any liability for such transactions approved by a majority of
the other Trustees, except for his or her bad faith or gross negligence, and any
such Trustee may be counted in determining the existence of a quorum at any
meeting of the Board of Trustees that authorizes any such transaction and may
vote at the meeting to authorize any such transaction.
- 48 -
Term
Our term is perpetual. Our existence does not terminate automatically
if we fail to maintain our qualification as a real estate investment trust for
tax purposes.
Fundamental Transactions; Amendments
Any merger to which we are a party (other than a merger of any entity
with and into us in which we owned at least 80% of the voting power immediately
prior to the merger and other than a merger that does not affect the aggregate
ownership interests of our shareholders in the surviving entity) and any sale or
transfer of all or substantially all of our assets (other than to an entity
directly or indirectly controlled by us) must be approved by the affirmative
vote of a majority of the votes cast by the holders of all shares entitled to
vote thereon (other than the holders of shares of a class or series of shares,
if any, entitled to vote thereon exclusively as a separate class or series) and
by a majority of the votes cast by the holders of any class or series, if any,
entitled to vote thereon separately as a class or series.
Amendments to the Trust Agreement can be made by the consent of
two-thirds of the Trustees, but not fewer than four. However: (i) no amendment
to increase the liability of shareholders shall be effective without the consent
of the holders of two-thirds of each class or series of shares outstanding; (ii)
no amendment may require additional contributions from or assessments against
shareholders; and (iii) no amendment (A) increasing our authorized
capitalization, or (B) having the reasonably foreseeable effect of impeding or
preventing a "Control Transaction" shall be effective unless approved by a
majority of the votes cast by all shareholders entitled to vote thereon (other
than the holders of any class or series, if any, entitled to vote thereon
exclusively as a separate class or series) and a majority of the votes cast by
the holders of any class or series, if any, entitled to vote thereon separately
as a class or series. As used in the Trust Agreement, the term "Control
Transaction" means the acquisition by any person or group of our shares having
at least 20% of the votes that all shareholders are entitled to cast in the
election of Trustees.
Applicable Law
The Trust Agreement provides that it shall be construed in accordance
with Pennsylvania law.
- 49 -
SUMMARY OF THE OPERATING PARTNERSHIP AGREEMENT
The following summary of the First Amended and Restated Agreement of
Limited Partnership of PREIT Associates, L.P., as amended (the "Operating
Partnership Agreement") is qualified in its entirety by reference to the
Operating Partnership Agreement.
General
We are the sole general partner of the Operating Partnership. We
contributed to the Operating Partnership, or to entities wholly owned by the
Operating Partnership, the real estate interests owned, directly or indirectly,
by us, or the economic benefits thereof, in exchange for a general partnership
interest in the Operating Partnership and a number of Class A OP Units that
equaled, in the aggregate, the number of our shares of beneficial interest
issued and outstanding on September 30, 1997.
Management
Under the Operating Partnership Agreement, we, as the sole general
partner of the Operating Partnership, have the authority, to the exclusion of
the limited partners, to make all management decisions on behalf of the
Operating Partnership. In addition, we, as general partner, will have the
ability to cause the Operating Partnership to create and issue subsequent
classes of limited or preferred partner interests with terms different from the
limited partner and general partner interests issued in connection with our
acquisition of The Rubin Organization, Inc. (the "TRO Transaction"). We have
agreed in the Operating Partnership Agreement to conduct substantially all of
our business activities through the Operating Partnership unless a majority in
interest of the OP Units (exclusive of OP Units owned by us) consent to the
conduct of business activities outside the Operating Partnership.
Authorization of OP Units and Voting Rights
The Operating Partnership Agreement authorizes the issuance of an
unlimited number of OP Units in one or more classes. Holders of OP Units are
entitled to distributions from the Operating Partnership as and when made by us
as the general partner. Because we will, of necessity, have to make
distributions on the Class A OP Units held directly or indirectly by us at the
times and in the amounts as will permit us to make distributions to our
shareholders necessary to preserve our status as a REIT for federal income tax
purposes, it is anticipated that the other holders of OP Units will receive such
distributions at the approximate time, and in the same amounts, as distributions
are declared and paid by us to our shareholders.
Holders of OP Units generally will have no right to vote on any matter
voted on by holders of our shares except that prior to the date on which at
least half of the OP Units issued on September 30, 1997 in connection with the
TRO transaction have been redeemed, the holders of OP Units issued on September
30, 1997 are entitled to vote, along with our shareholders as a single class, on
any proposal to merge, consolidate, or sell substantially all of our assets. Our
OP Units are not included for purposes of determining when half of the OP Units
issued on September 30, 1997 have been redeemed, nor are they counted as votes.
If the holders of our shares vote on such a transaction and holders of OP Units
are to vote thereon, each OP Unit will be entitled to one vote for each share
issuable by us upon the redemption of the OP Unit and the necessary vote to
effect such action shall be the sum of an absolute majority of the outstanding
OP Units and the applicable vote of the holders of our outstanding shares, which
such vote may be met by any combination of holders of OP Units or shares.
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The Operating Partnership Agreement also provides that we may not
engage in a fundamental transaction (e.g., a merger) unless, by the terms of
such transaction, the OP Units are treated in the same manner as that number of
shares for which they are exchangeable by us upon notice of redemption are
treated. Holders of OP Units also have the right to vote on certain amendments
to the Operating Partnership Agreement.
Redemption Rights
Class A and Class B OP Units are redeemable by the Operating
Partnership at the election of a limited partner holding such units, at such
time, and for such consideration, as set forth in the Operating Partnership
Agreement. In general, and subject to certain exceptions and limitations,
holders of OP Units (other than us and our subsidiaries) may, beginning one year
following the respective issue dates, give one or more notices of redemption
with respect to all or any part of the Class A OP Units so received and then
held by such party. Class B OP Units are redeemable at the option of the holder
at any time after issuance.
If a notice of redemption is given, we have the right to elect to
acquire the Units tendered for redemption for our own account, either in
exchange for the issuance of a like number of shares (subject to adjustments for
stock splits, recapitalizations, and like events) or a cash payment equal to the
average closing price of the shares over the ten consecutive trading days
immediately prior to receipt by us, in our capacity as general partner of the
Operating Partnership, of the notice of redemption. If we decline to exercise
such right, then on the tenth day following tender for redemption, the Operating
Partnership will pay a cash amount equal to the number of OP Units so tendered
multiplied by such average closing price.
Registration Rights
At the closing of the TRO Transaction, we entered into Registration
Rights Agreements with those persons receiving or entitled to receive (i) Class
A OP Units in respect of shares of The Rubin Organization and/or their interests
in certain properties acquired by the Operating Partnership in the TRO
Transaction and (ii) the Class B OP Units issued in the TRO Transaction. In
general, the Registration Rights Agreement for the holders of Class A OP Units
provides that those parties receiving and entitled to receive Class A OP Units
in the TRO Transaction will be entitled to cause us, subject to exclusions and
limitations commonly found in agreements of this type, to register shares
issuable upon redemption of such OP Units for resale by them in connection with
other registration statements filed by us. This Registration Rights Agreement
contains provisions dealing with registration procedures, holdbacks,
responsibility for expenses, indemnification, and other customary provisions.
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If the former shareholders of The Rubin Organization having piggyback
registration rights do not have an opportunity to exercise those rights before a
specified period following the last issuance of Class A OP Units pursuant to the
TRO Transaction, these former shareholders will have the right to cause us to
file a registration statement covering the resale of the shares issuable upon
redemption of such OP Units. In such event, we will be obligated to use our
commercially reasonable efforts to cause the registration statement to become
effective within 60 days after filing and to remain effective for not less than
two years (or until the date on which shares may be sold without registration,
if earlier).
We also entered into Registration Rights Agreements with other holders
of Class A and Class B OP Units, pursuant to which we have agreed to file and
maintain registration statements covering resales from time to time of shares
obtained in connection with the redemption of Class A and Class B OP Units. We
have agreed to use our reasonable best efforts to include in such registration
statements resales of shares issued upon redemption of Class A OP Units issued
in connection with TRO Transaction.
Other Rights
If the Operating Partnership determines to sell, before the fifth
anniversary of the date on which a property is acquired by the Operating
Partnership, certain specified properties for which Class A Units were issued in
the TRO Transaction, and the holders of a majority of the then outstanding Class
A OP Units issued to the former affiliates of The Rubin Organization object to
such sale, the sale will not be consummated unless (i) the sale constitutes an
exchange under Section 1031 of the Code or (ii) the sale is in connection with
the proposed sale of all or substantially all of the assets of the Operating
Partnership.
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FEDERAL INCOME TAX CONSIDERATIONS
General
The following discussion summarizes the federal income tax
considerations that may be material to a prospective holder of shares or other
securities. Drinker Biddle & Reath LLP, our counsel, has provided an opinion
letter to us respecting the discussion set forth below under this heading
"Federal Income Tax Considerations," and the opinion is included as an exhibit
to the registration statement of which this prospectus is a part. The following
discussion, which is not exhaustive of all possible tax considerations, does not
give a detailed discussion of any state, local or foreign tax considerations;
nor does it discuss all of the aspects of federal income taxation that may be
relevant to a prospective holder of our securities in light of his or her
particular circumstances or to certain types of investors (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) who are subject to special treatment under the federal income tax laws.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF SECURITIES ISSUED BY AN ENTITY ELECTING TO BE
TAXED AS A REIT, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
Taxation of the Company
General. The Company is designed to qualify and has elected to qualify
as a "real estate investment trust" under Sections 856-60 of the Code. The
Company believes that it has been organized and has operated in a manner to
qualify for taxation as a REIT under the Code, and the Company intends to
continue to operate in this manner. No assurance, however, can be given that the
Company has operated in a manner so as to qualify as a REIT or that it will
continue to operate in this manner in the future. Qualification and taxation as
a REIT depends upon the Company's ability to meet on a continuing basis, through
actual annual operating results, distribution levels and diversity of share
ownership, the various qualification tests imposed under the Code on REITs, some
of which are summarized below. While the Company intends to operate so that it
qualifies as a REIT, given the highly complex nature of the rules governing
REITs, the ongoing importance of factual determinations, and the possibility of
future changes in circumstances of the Company, no assurance can be given that
the Company satisfies these tests or will continue to do so. See "Failure to
Qualify" below.
The following is a general summary of the Code provisions that govern
the Federal income tax treatment of a REIT and its shareholders. These
provisions of the Code are highly technical and complex. This summary is
qualified in its entirety by the applicable Code provisions, Treasury
Regulations and administrative and judicial interpretations thereof. If the
Company qualifies for taxation as a REIT, it generally will not be subject to
Federal corporate income taxes on net income that it currently distributes to
shareholders. However, the Company will be subject to Federal income tax on any
income that it does not distribute and will be subject to Federal income tax in
certain circumstances on certain types of income even though that income is
distributed.
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Requirements for Qualification. The Code defines a REIT as a
corporation, trust or association (i) that is managed by one or more trustees or
directors; (ii) the beneficial ownership of which is evidenced by transferable
shares of stock, or by transferable certificates of beneficial interest; (iii)
that would be taxable as a domestic corporation, but for Sections 856 through
859 of the Code; (iv) that is neither a financial institution nor an insurance
company subject to certain provisions of the Code; (v) the beneficial ownership
of which is held by 100 or more persons; (vi) not more than 50% in value of the
outstanding shares of which are owned, directly or by attribution, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of each taxable year; and (vii) that meets certain other tests,
described below, regarding the nature of its income and assets. The Code
provides that conditions (i) through (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months. The Company's Trust Agreement provides certain
disclosure requirements for 1% or greater shareholders and certain restrictions
regarding the transfers of Company shares that are intended to assist the
Company in continuing to satisfy the share ownership requirements described in
(v) and (vi) above.
A REIT is permitted to have a wholly owned subsidiary (also referred to
as a "qualified REIT subsidiary"). A qualified REIT subsidiary is not treated as
a separate entity for Federal income tax purposes. Rather, all of the assets,
liabilities and items of income, deductions and credit of a qualified REIT
subsidiary are treated as if they were those of the REIT.
A REIT is also generally permitted to own any percentage of the stock
of a corporation (a "taxable REIT subsidiary"), provided that the aggregate
value of the REIT's interests in taxable REIT subsidiaries and other securities
does not exceed 25% of the value of the REIT's gross assets. A corporation that
is wholly or partially owned by a REIT will qualify as a "taxable REIT
subsidiary" if both the REIT and the subsidiary so elect.
A REIT is deemed to own its proportionate share of the assets of a
partnership in which it is a partner and is deemed to receive its proportionate
share of the income of the partnership. Thus, the Company's proportionate share
of the assets, liabilities and items of income of its Operating Partnership and
each of the real estate partnerships or other pass-through entities in which its
Operating Partnership holds an interest (the "Title Holding Partnerships") will
be treated as assets, liabilities and items of income of the Company for
purposes of applying the requirements described herein, provided that the
Operating Partnership and the Title Holding Partnerships are treated as
partnerships for Federal income tax purposes.
Income Tests. To maintain its qualification as a REIT, a REIT must
satisfy two gross income requirements each year. First, at least 75% of the
REIT's gross income (excluding gross income from prohibited transactions) for
each year must be derived directly or indirectly from investments in real
property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the REIT's gross income (excluding gross
income from prohibited transactions) for each year must be derived from the same
items that qualify under the 75% income test, and from dividends, interest and
gain from the sale or disposition of stock or securities, or from any
combination of the foregoing.
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Rents received by the Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions (related to the identity of the tenant, the
computation of the rent payable, and the nature of the property leased) are met.
The Company does not anticipate receiving rents in excess of five (5%) percent
of gross income that fail to meet these conditions. In addition, for rents
received to qualify as "rents from real property," the Company generally must
not furnish or render more than a de minimus amount of services to tenants,
other than through an "independent contractor" from whom the Company derives no
revenue or a taxable REIT subsidiary. The "independent contractor" requirement,
however, does not apply to the extent the services provided by the Company are
"usually or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the occupant."
Although PREIT Services, LLC, which, together with PREIT-RUBIN, comprise our
commercial property development and management business, renders services with
respect to rental properties of the Operating Partnership and the Title Holding
Partnerships, and PREIT Services does not constitute an "independent contractor"
for this purpose, the Company believes that the services being provided by PREIT
Services with respect to these properties in past years have been usual or
customary or should not otherwise be considered "rendered to the occupant." The
Company believes that the aggregate amount of any nonqualifying income in any
taxable year earned by the Operating Partnership and the Title Holding
Partnerships has not caused, and will not cause, the Company to exceed the
limits on nonqualifying income under the 75% and 95% gross income tests.
The Operating Partnership owns all of the outstanding shares of
PREIT-RUBIN. For years beginning after December 31, 2000, the Company has
elected for PREIT-RUBIN to be treated as a taxable REIT subsidiary. As such,
PREIT-RUBIN is taxable as a regular corporation. PREIT-RUBIN performs
management, development and leasing services for the Operating Partnership and
other real estate owned in whole or in part by third parties. The third-party
income earned by and taxed to PREIT-RUBIN would be nonqualifying income if
earned directly by the Company. As a result of the corporate structure, all
third-party and other services income will be earned by and taxed to PREIT-RUBIN
at applicable Federal and state corporate income tax rates and will be received
by the Company only indirectly as dividends, after reduction by these taxes.
Such dividends will be qualifying income under the 95% test.
If the Company fails to satisfy one or both of the 75% or the 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
that year if it is entitled to relief under certain provisions of the Code. It
is not possible, however, to state whether in all circumstances the Company
would be entitled to the benefit of these relief provisions. Even if these
relief provisions were to apply, however, a tax would be imposed with respect to
the "excess net income" attributable to the failure to satisfy the 75% and the
95% gross income tests.
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Asset Tests. The Company, at the close of each quarter of its taxable
year, must satisfy three tests relating to the nature of its assets: (i) at
least 75% of the value of the Company's total assets must be represented by
"real estate assets," cash, cash items and government securities; (ii) not more
than 25% of the Company's total assets may be represented by securities other
than those in the 75% asset class; and (iii) of the investments included in the
25% asset class, the value of any one issuer's securities (other than an
interest in a partnership, shares of a "qualified REIT subsidiary" or another
REIT) owned by the Company may not exceed 5% of the value of the Company's total
assets, and the Company may not own more than 10% of the vote or value of any
one issuer's outstanding common stock (other than an interest in a partnership,
shares of a qualified REIT subsidiary, a taxable REIT subsidiary or another
REIT).
The Company believes that it has complied, and anticipates that it will
continue to comply, with these asset tests. The Company is deemed to hold
directly its proportionate share of all real estate and other assets of its
Operating Partnership and all assets deemed owned by the Operating Partnership
through its ownership of partnership interests in other partnerships. As a
result, the Company believes that more than 75% of its assets are real estate
assets. In addition, the Company does not plan to hold any securities
representing more than 10% of the vote or value of any one issuer's common
stock, other than any qualified REIT subsidiary or taxable REIT subsidiary of
the Company, nor securities of any one issuer exceeding 5% of the value of the
Company's gross assets. As previously discussed, the Company is deemed to own
its proportionate share of the assets of a partnership in which it is a partner
so that the partnership interest, itself, is not a security for purposes of this
asset test.
After initially meeting the asset tests at the close of any quarter,
the Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company intends to maintain adequate records of the value of
its assets to ensure compliance with the asset tests, and to take any other
action within 30 days after the close of any quarter as may be required to cure
any noncompliance. We cannot assure you, however, that this other action will
always be successful.
Annual Distribution Requirements. To qualify as a REIT, the Company
generally must distribute to its shareholders at least 90% of its income (aside
from net capital gains) each year. In addition, the Company will be subject to
tax on the undistributed amount at regular corporate rates and also may be
subject to a 4% excise tax on undistributed income.
The Company believes that it has made, and expects to continue to make,
timely distributions sufficient to satisfy the annual 90% distribution
requirement. It is possible, however, that the Company, from time to time, may
not have sufficient cash or other liquid assets to meet the 90% distribution
requirement and to avoid all corporate-level taxes. In that event, the Company
may arrange for short-term, or possibly long-term, borrowing (by itself or by
its Operating Partnership) to meet the 90% distribution requirement and avoid
the corporate-level taxes.
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Failure to Qualify. If the Company fails to qualify for taxation as a
REIT in any taxable year, the Company will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Unless entitled to relief under specific statutory provisions, the
Company also will be disqualified from taxation as a REIT for the four taxable
years following the year during which qualification was lost. It is not possible
to state whether in all circumstances the Company would be entitled to this
statutory relief.
Limitations Applicable to Taxable REIT Subsidiaries. Certain provisions
of the Code are designed to curtail a REIT's ability to minimize the taxable
income of any taxable REIT subsidiary, such as PREIT-RUBIN. A 100% tax will
apply to any excessive interest expense or other deductions paid by a taxable
REIT subsidiary to the REIT and to any amounts by which the taxable REIT
subsidiary undercharges tenants of the REIT. Also, there are limitations on the
deductibility of interest by highly leveraged taxable REIT subsidiaries.
Income Taxation of PREIT Associates, the Title Holding Partnerships and their
Partners
The following discussion summarizes certain Federal income tax
considerations applicable to the Company's investment in its Operating
Partnership and the Title Holding Partnerships:
Classification of the Operating Partnership and Title Holding
Partnerships as Partnerships. The Company will be entitled to include in its
income its distributive share of the income and to deduct its distributive share
of the losses of its Operating Partnership (including its Operating
Partnership's share of the income or losses of the Title Holding Partnerships)
only if the Operating Partnership and the Title Holding Partnerships
(collectively, the "Partnerships") are classified for Federal income tax
purposes as partnerships rather than as associations taxable as corporations.
The Partnerships have not elected, and do not intend to elect, to be taxable for
Federal income tax purposes as corporations. Accordingly, under applicable
"check-the-box" regulations, they should be classified as partnerships for
Federal income tax purposes.
Partnership Allocations. Although a partnership agreement generally
will determine the allocation of income and losses among partners, the
allocations will be disregarded for tax purposes under Section 704(b) of the
Code if they do not comply with the provisions of Section 704(b) of the Code and
the Treasury Regulations promulgated thereunder as to substantial economic
effect and other requirements.
If an allocation is not recognized for Federal income tax purposes, the
item subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking into
account all of the facts and circumstances relating to the economic arrangement
of the partners with respect to the item. The Operating Partnership's
allocations of taxable income and loss are intended to comply with the
requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.
Tax Allocations With Respect to Contributed Properties. The properties
contributed directly or indirectly to the Operating Partnership have generally
been appreciated as of the time of contribution, and it is likely that
properties contributed in the future will also be appreciated. Under Section
704(c) of the Code, items of income, gain, loss and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for Federal income
tax purposes in a manner so that the contributor is charged with or benefits
from the unrealized gain or unrealized loss associated with the property at the
time of the contribution. The amount of the unrealized gain or unrealized loss
is generally equal to the difference between the fair market value of the
contributed property at the time of contribution and the adjusted tax basis of
the property at the time of contribution. The partnership agreements of the
Partnerships require allocations of income, gain, loss and deduction
attributable to the contributed property to be made in a manner that is
consistent with Section 704(c) of the Code. If the Partnerships sell contributed
property at a gain or loss, the gain or loss will be allocated to the
contributing partner(s) generally to the extent of the precontribution
unrealized gain or loss.
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Depreciation. The Partnerships' assets other than cash consist largely
of appreciated property contributed by its partners. Assets contributed to a
partnership in a tax-free transaction carry over their depreciation schedules.
Accordingly, the Operating Partnership depreciation deductions for its real
property are based largely on the historic depreciation schedules for the
properties. The properties are being depreciated over a range of 15 to 40 years
using various methods of depreciation which were determined at the time that
each item of depreciable property was placed in service. Any real property
purchased by the Partnerships will be depreciated over at least 39 years, except
that residential buildings will be depreciated over 27.5 years, and land is
nondepreciable. In certain instances where a partnership interest rather than
real estate is contributed to the Partnership, the real estate may not carry
over its depreciation schedule but rather may, similarly, be subject to the
lengthier depreciation period.
Section 704(c) of the Code requires that depreciation as well as gain
and loss be allocated in a manner so as to take into account the variation
between the fair market value and tax basis of the property contributed.
Depreciation with respect to any property purchased by the Operating Partnership
subsequent to the admission of its partners, however, will be allocated among
the partners in accordance with their respective percentage interests in the
Partnerships.
Sale of Partnership Property. Generally, any gain realized by a
partnership on the sale of property held by the partnership for more than one
year will be long-term capital gain, except for any portion of the gain that is
treated as depreciation or cost recovery recapture. However, under the REIT
requirements, the Company's share as a partner of any gain realized by the
Partnerships on the sale of any property held as inventory or other property
held primarily for sale to customers in the ordinary course of a trade or
business will be treated as income from a prohibited transaction that is subject
to a 100% penalty tax. The prohibited transaction income could also have an
adverse effect upon the Company's ability to satisfy the income tests for REIT
status. Under existing law, whether property is held as inventory or primarily
for sale to customers in the ordinary course of a trade or business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction. A safe harbor to avoid classification as a
prohibited transaction exists as to real estate assets held for the production
of rental income by a REIT for at least four years where in any taxable year the
REIT has made no more than seven sales of property or, in the alternative, the
aggregate of the adjusted bases of all properties sold does not exceed 10% of
the adjusted bases of all of the REIT's properties during the year and the
expenditures includable in a property's net sales price. The Partnerships intend
to hold properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning, and operating and
leasing properties and to make occasional sales of the properties as are
consistent with the Company's and its Operating Partnership's investment
objectives. No assurance can be given, however, that no property sale by the
Partnerships will constitute a sale of inventory or other property held
primarily for sale to customers.
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Taxation of Shareholders
Taxation of Taxable Domestic Shareholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
shareholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income, and corporate shareholders will not be eligible for the
dividends-received deduction as to the amounts. Distributions that are
designated as 20%-rate capital gain dividends will be taxed as long-term capital
gains, and distributions that are designated as 25%-rate gain dividends will be
taxed as 25%-rate gain, in each case without regard to the period for which the
shareholder has held its shares. However, corporate shareholders may be required
to treat up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current or accumulated earnings and profits will not
be taxable to a shareholder to the extent that they do not exceed the adjusted
basis of the shareholder's shares, but rather will reduce the adjusted basis of
the shares. To the extent that the distributions exceed the adjusted basis of a
shareholder's shares, they will be included in income as long-term capital gain
(or short-term capital gain if the shares have been held for one year or less),
assuming the shares are a capital asset in the hands of the shareholder.
In addition, to the extent, if any, that the Company does not
distribute all its net capital gain (including 25%-rate gain) in a year, the
Company may elect to designate (in a written notice to shareholders) that the
undistributed capital gain shall nonetheless be treated for Federal income tax
purposes as if it had been distributed proportionately to the Company's
shareholders as of the end of the year and recontributed to the Company's
capital. In that case, the shareholders will be taxed on the gain, but will
receive a tax credit for the tax paid by the Company on the gain, and each
shareholder's basis in shares of the Company will be increased by the excess of
the amount of the gain over the amount of the tax credit.
In general, a domestic shareholder will realize capital gain or loss on
the disposition of shares equal to the difference between (i) the amount of cash
and the fair market value of any property received on the disposition and (ii)
the shareholder's adjusted basis of the shares. The gain or loss generally will
constitute long-term capital gain or loss if the shareholder has held the shares
for more than one year. For an individual shareholder, the long-term capital
gain will generally be taxable at a maximum rate of 20%, except that a reduced
rate may apply for gain on shares held more than five years. Loss upon a sale or
exchange of shares by a shareholder who has held the shares for six months or
less (after applying certain holding period rules) will be treated as a
long-term capital loss to the extent of distributions from the Company required
to be treated by the shareholder as long-term capital gain (including both 20%-
and 25%-rate gain).
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Under certain circumstances, domestic shareholders may be subject to
backup withholding at the rate of 30% with respect to dividends paid.
Taxation of Tax-Exempt Shareholders. The Company does not expect that
distributions by the Company to a shareholder that is a tax-exempt entity will
constitute "unrelated business taxable income" ("UBTI"), provided that the
tax-exempt entity has not financed the acquisition of its shares with
"acquisition indebtedness" within the meaning of the Code and the shares are not
otherwise used in an unrelated trade or business of the tax-exempt entity.
Taxation of Non-U.S. Shareholders. The rules governing U.S. Federal
income taxation of nonresident alien individuals, foreign corporations, foreign
partnerships and other foreign shareholders (collectively, "Non-U.S.
Shareholders") are complex, and no attempt will be made herein to provide more
than a limited summary of these rules. Prospective Non-U.S. Shareholders should
consult with their own tax advisor to determine the impact of U.S. Federal,
state and local income tax laws with regard to an investment in shares,
including any reporting requirements. In particular, Non-U.S. Shareholders who
are engaged in a trade or business in the United States, and Non-U.S.
Shareholders who are individuals and who were present in the United States for
183 days or more during the tax year and have a "tax home" in the United States,
may be subject to tax rules different from those described below.
Distributions that are not attributable to gain from sales or exchanges
by the Company of U.S. real property interests and not designated by the Company
as capital gain dividends will be treated as dividends of ordinary income to the
extent that they are made out of current or accumulated earnings and profits of
the Company. These distributions, ordinarily, will be subject to a withholding
tax equal to 30% of the gross amount of the distribution unless an applicable
tax treaty reduces that tax. Distributions in excess of current and accumulated
earnings and profits of the Company will not be taxable to a Non-U.S.
Shareholder to the extent that they do not exceed the adjusted basis of the
shareholder's shares, but rather will reduce the adjusted basis of the shares.
To the extent that these distributions exceed the adjusted basis of a Non-U.S.
Shareholder's shares, they will give rise to tax liability if the Non-U.S.
Shareholder would otherwise be subject to tax on any gain from the sale or
disposition of shares as described below (in which case they also may be subject
to a 30% branch profits tax if the shareholder is a foreign corporation). If it
cannot be determined at the time a distribution is made whether or not the
distribution will be in excess of current or accumulated earnings and profits,
the entire distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Shareholder may seek a refund of the amounts
from the IRS if it is subsequently determined that the distribution was, in
fact, in excess of current or accumulated earnings and profits of the Company.
For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Company of U.S.
real property interests will be taxed to a Non-U.S. Shareholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA")
at the normal capital gain rates applicable to U.S. shareholders (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Also, distributions subject to FIRPTA
may be subject to a 30% branch profits tax in the hands of a corporate Non-U.S.
Shareholder not entitled to treaty relief or exemption. The Company is required
by applicable Treasury Regulations to withhold 35% of any distribution that is
or could be designated by the Company as a capital gain dividend. The amount
withheld is creditable against the Non-U.S. Shareholder's FIRPTA tax liability.
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Although the law is not entirely clear on the matter, it appears that
amounts of undistributed capital gain that are designated by the Company as
deemed distributions (as discussed under "Taxation of Taxable Domestic
Shareholders" above) would be treated with respect to Non-U.S. Shareholders in
the manner outlined in the preceding paragraph for actual distributions by the
Company of capital gain dividends. Under that approach, the Non-U.S.
Shareholders would be able to offset as a credit against their United States
Federal income tax liability resulting therefrom their proportionate share of
the tax paid by the Company on the undistributed capital gains (and to receive
from the IRS a refund to the extent their proportionate share of the tax paid by
the Company were to exceed their actual United States Federal income tax
liability).
Gain recognized by a Non-U.S. Shareholder upon a sale of shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of its stock was held directly
or indirectly by foreign persons. The Company believes that it is a
"domestically controlled REIT," and, therefore, that the sale of shares will not
be subject to taxation under FIRPTA. If the gain on the sale of shares were to
be subject to tax under FIRPTA, the Non-U.S. Shareholder would be subject to the
same treatment as U.S. shareholders with respect to the gain (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals), and the purchaser of the shares would be
required to withhold and remit to the IRS 10% of the purchase price.
Other Tax Considerations
State and Local Taxes. The Company and its shareholders may be subject
to state or local taxation in various state or local jurisdictions, including
those in which it or they transact business or reside. The state and local tax
treatment of the Company and its shareholders may not conform to the Federal
income tax consequences discussed above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and local
tax laws on an investment in the shares of the Company.
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PLAN OF DISTRIBUTION
We may sell the securities being offered hereby in any of, or any
combination of, the following ways: to investors directly; through agents;
through underwriters; and/or through dealers.
Offers to purchase the securities may be solicited by agents designated
by us from time to time. Any agent involved in the offer or sale of the
securities under this prospectus will be named, and any commissions payable by
us to these agents will be set forth, in a related prospectus supplement. Unless
otherwise indicated in a prospectus supplement, any agent will be acting on a
reasonable best efforts basis for the period of its appointment.
If the securities are sold by means of an underwritten offering, we
will execute an underwriting agreement with an underwriter or underwriters at
the time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the related prospectus supplement. That
prospectus supplement and this prospectus will be used by the underwriters to
make resales of the securities. If underwriters are used in the sale of any
securities in connection with this prospectus, those securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at fixed public
offering prices, at market prices prevailing at the time of sale, or at prices
related to such prevailing market prices.
Securities may be offered to the public either through underwriting
syndicates represented by managing underwriters or directly by one or more
underwriters. If any underwriter or underwriters are used in the sale of
securities, unless otherwise indicated in a related prospectus supplement, the
underwriting agreement will provide that the obligations of the underwriters are
subject to some conditions precedent and that the underwriters with respect to a
sale of the securities will be obligated to purchase all such securities if any
are purchased.
In connection with the sale of the securities, underwriters may be
deemed to have received compensation from us in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of the
securities for whom they may act as agent. Underwriters may sell securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
from the purchasers for whom they may act as agent.
We may grant to the underwriters options to purchase additional
securities, to cover over-allotments, if any, at the public offering price, with
additional underwriting commissions or discounts, as may be set forth in a
related prospectus supplement. If we grant any over-allotment option, the terms
of that over-allotment option will be set forth in the related prospectus
supplement.
If we use a dealer in the sale of the securities in respect of which
this prospectus is delivered, we will sell the securities to the dealer as
principal. The dealer may then resell such securities to the public at varying
prices to be determined by such dealer at the time of resale. The name of the
dealer and the terms of the transaction will be set forth in the prospectus
supplement relating to those offers and sales.
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Agents and dealers participating in the distribution of the securities
may be deemed to be underwriters, and any discounts and commissions received by
them and any profit realized by them on resale of the securities may be deemed
to be underwriting discounts and commissions under the Securities Act. Agents,
underwriters and dealers may be entitled, under agreements entered into with us,
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
Agents, underwriters and dealers may engage in transactions that
stabilize, maintain or otherwise affect the price of the securities being
offered, including over-allotment, stabilizing and short-covering transactions
in such securities, and the imposition of a penalty bid, in connection with the
offering.
Certain of the agents, underwriters, dealers and their affiliates may
be customers of, engage in transactions with and perform services for us and our
subsidiaries in the ordinary course of business.
We may also directly solicit offers to purchase securities and those
sales may be made by us directly to institutional investors or others, who may
be deemed to be underwriters within the meaning of the Securities Act with
respect to any resale of those securities. The terms of any sales of this type
will be described in the prospectus supplement.
Other than the shares of beneficial interest, all securities offered
will be a new issue of securities with no established trading market. Any
underwriter to whom we sell securities for public offering and sale may make a
market in those securities, but the underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. The securities
may or may not be listed on a national securities exchange or a foreign
securities exchange, except that the shares of beneficial interest are listed
for trading on the New York Stock Exchange. Any shares of beneficial interest
sold pursuant to a prospectus supplement will be listed for trading on the New
York Stock Exchange, subject to official notice of issuance. No assurance can be
given as to the liquidity of or the trading markets for any securities.
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LEGAL MATTERS
The legality of the shares, the preferred shares, the debt securities,
the warrants and the units offered hereby will be passed upon for us by Drinker
Biddle & Reath LLP. Drinker Biddle & Reath LLP will also pass on certain federal
income tax matters respecting us.
EXPERTS
The financial statements and schedules incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
On July 19, 2002, we filed a Current Report on Form 8-K indicating that
we had terminated Arthur Andersen LLP as our auditors and engaged a new auditing
firm. Arthur Andersen has not consented to the incorporation by reference of
their reports in this prospectus, and we have dispensed with the requirement to
file their consent in reliance on Rule 437a under the Securities Act. Because
Arthur Andersen has not consented to the incorporation by reference of their
reports in this prospectus, you will not be able to recover against Arthur
Andersen under Section 11 of the Securities Act for any untrue statements of a
material fact contained in the financial statements audited by Arthur Andersen
that are incorporated by reference in this prospectus or any omissions to state
a material fact required to be stated therein.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the SEC using a "shelf" registration process. Under this shelf registration
process, we may sell any combination of the securities described in this
prospectus in one or more offerings up to an aggregate total public offering
price of $300,000,000. This prospectus provides you with a general description
of the securities we may offer. Each time we sell securities, we will provide a
prospectus supplement that will contain specific information about the terms of
that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. To the extent information in any such
supplement differs from this prospectus, you should rely on the different
information in the prospectus supplement. You should read both this prospectus
and any prospectus supplement together with additional information described in
Where You Can Find More Information.
You should rely only on the information we include or incorporate by
reference in this prospectus and any applicable prospectus supplement. We have
not authorized anyone to provide you with different or additional information.
The information contained in this prospectus, the applicable prospectus
supplement and any document incorporated by reference in this prospectus is
accurate only as of the date on the front of those documents, regardless of the
time of delivery of this prospectus or the applicable prospectus supplement or
of any sale of our securities, and you should not assume that the information in
this prospectus, the applicable prospectus supplement or any document
incorporated by reference in this prospectus is accurate as of any other date.
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, which require us to file reports, proxy statements and
other information with the SEC. You may read and copy our SEC filings at the
SEC's Public Reference Facilities, which are in Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 and the SEC's following regional offices: 233
Broadway, New York, New York 10279 and 175 W. Jackson Boulevard, Chicago,
Illinois 60604. Copies of the material can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates, by calling 1-800-SEC-0330. The SEC also maintains an Internet
web site at http://www.sec.gov that contains our SEC filings. In addition, our
shares are listed on the New York Stock Exchange and our SEC filings can be
inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
We filed with the SEC a registration statement on Form S-3 under the
Securities Act of 1933 with respect to the securities we are offering by this
prospectus. This prospectus does not contain all of the information set forth in
the registration statement because we have omitted some of the information as
permitted by the SEC's rules and regulations. Statements contained in this
prospectus as to the contents of any contract or other document are not
necessarily complete. In each instance, each statement is qualified, in all
respects, by reference to the copy of the applicable contract or document filed
as an exhibit to the registration statement. For further information about us
and our securities, we refer you to the registration statement and the exhibits
and schedules that may be obtained from the SEC at its principal office in
Washington, D.C. after payment of the SEC's prescribed fees.
The SEC allows us to "incorporate by reference" the information in
documents we file with them. This means that we can disclose important
information by referring you to these documents. The information we incorporate
by reference is an important part of this prospectus, and information in
documents we file after the date of this prospectus automatically will update
and supersede information in this prospectus.
We filed the documents listed below under the Exchange Act with the
SEC, and we incorporate each of the documents, and all documents filed after the
date of this prospectus under Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, into this prospectus by reference:
1. Our Annual Report on Form 10-K for the calendar year ended December
31, 2001, filed on March 28, 2002.
2. Our Quarterly Reports on Form 10-Q for the quarter ended March 31,
2002, filed on May 14, 2002 and for the quarter ended June 30, 2002,
filed on August 14, 2002.
3. Our Current Reports on Form 8-K dated April 4, 2002, filed on April
11, 2002 (as amended by Form 8-K/A filed on April 30, 2002), dated
June 28, 2002, filed on July 25, 2002 and dated July 16, 2002, filed
on July 19, 2002.
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4. The description of our shares contained in the registration
statement on Form 8-A filed on October 24, 1997 (amended November
13, 1997 and again on December 17, 1997) and the description of the
rights to purchase our shares contained in the registration
statement on Form 8-A filed on May 3, 1999.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, after their written or oral request, a copy of any or
all of the documents we have incorporated in this prospectus by reference.
Written requests for copies should be addressed to:
Pennsylvania Real Estate Investment Trust
Attention: Bruce Goldman,
Senior Vice President-General Counsel
The Bellevue
200 S. Broad Street
Philadelphia, Pennsylvania 19102
Telephone: (215) 875-0700
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FORWARD LOOKING STATEMENTS
In this prospectus and in reports we incorporate into this prospectus,
we use forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "estimate," "plan," or "continue," or the negative of or other
variations on these terms, or comparable terminology, which are referred to
under the securities laws as "forward-looking statements."
Our forward-looking statements are affected by known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to differ materially from the results, performance and
achievements expressed or implied by our forward-looking statements. Some, but
not all, of these risks, uncertainties and factors are discussed in this
prospectus. We disclaim any obligation to update this discussion or to announce
publicly the result of any revisions to any of the forward-looking statements
contained in this prospectus to reflect future events or developments.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than selling or
underwriting discounts and commissions, we will incur in connection with the
issuance and distribution of the securities being registered. All amounts shown
are estimated except the SEC registration fee.
Table:
SEC registration fee..............................................$ 27,600
Printing and engraving expenses...................................$ 20,000
Legal fees and expenses...........................................$ 75,000
Accounting fees and expenses......................................$ 50,000
Trustees' fees and expenses.......................................$ 12,000
Miscellaneous.....................................................$ 5,000
Total...............................................$189,600
Item 15. Indemnification of Directors and Officers.
Our Trust Agreement, as amended, provides that:
o no Trustee shall be personally liable to any person or entity for
any of our acts, omissions or obligations;
o no Trustee shall be personally liable for monetary damages for any
action, or any failure to act, except to the extent a Pennsylvania
business corporation's director would remain liable under the
provisions of 15 Pa. CS Section 1713; and
o no officer who performs his duties in good faith, in a manner
reasonably believed to be in our best interests and with the care,
skill and diligence a person of ordinary prudence would use will be
liable by reason of having been an officer.
Our Trust Agreement provides also that every Trustee and officer is
entitled as of right to be indemnified by us against reasonable expense
(including attorney's fees) and any liability, loss, judgment, excise tax, fine,
penalties, and settlements they pay or incur in connection with an actual
(whether pending or completed) or threatened claim, action, suit or proceeding,
civil, criminal, administrative, investigative or other, whether brought by or
in our right or otherwise, in which he or she may be involved, as a party or
otherwise, by reason of being or having been a Trustee or officer or because the
person is or was serving in any capacity at our request as a trustee, director,
officer, employee, agent, partner, fiduciary or other representative of another
real estate investment trust, corporation, partnership, joint venture, trust,
employee benefit plan or other entity provided, however, that:
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o no right of indemnification will exist with respect to an action
brought by a Trustee or officer against us; and
o no indemnification will be made in any case where the act or failure
to act giving rise to the claim for indemnification is determined by
the final judgment of a court of competent jurisdiction to have
constituted willful misconduct or recklessness.
The right to indemnification is contractual in nature and includes the
right to be paid in advance the expenses incurred in connection with any
proceedings; provided, however, that advance payments must be made in accordance
with applicable law and must be accompanied by an undertaking by or on behalf of
the applicable Trustee or officer to repay all amounts so advanced if it is
determined ultimately that the applicable Trustee or officer is not entitled to
indemnification under the Trust Agreement.
Our By-laws require us to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or proceeding, including actions by or in our right, whether civil, criminal,
administrative or investigative, because the person is or was a Trustee or
officer, or is or was serving, while a Trustee or officer, at our request, as a
director, officer, employee, agent, fiduciary or other representative of another
for profit or not-for-profit corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees), judgments, fines, excise taxes and amounts paid in settlement
incurred actually and reasonably by the person in connection with the action or
proceeding, unless a court determines that the act or failure to act giving rise
to the claim for indemnification constituted willful misconduct or recklessness.
Our By-laws also provide that the right to indemnification is contractual in
nature and includes the right to be paid the expenses (including attorneys fees)
incurred in defending any action or proceeding in advance of the action or
proceeding's final disposition upon our receipt of an undertaking by or on
behalf of the person to repay the amount if it is determined ultimately that the
person is not entitled to indemnification.
In addition, our Trust Agreement and Pennsylvania law permit us to
provide similar indemnification to employees, agents and other persons who are
not Trustees or officers. Pennsylvania law also permits indemnification in
connection with a proceeding brought by or in our right to procure a judgment in
our favor and requires indemnification in certain cases where the Trustee or
officer is the prevailing party. Certain of the employment agreements we have
entered into with our officers provide the officer indemnification. Generally,
these contracts require us to indemnify the officer to the fullest extent
permitted under the Trust Agreement. The limited partnership agreement for PREIT
Associates, our operating partnership (the "Operating Partnership"), also
provides for indemnification of us, our Trustees and our officers for any and
all actions with respect to PREIT Associates; provided, however, that PREIT
Associates will not provide indemnity for:
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o willful misconduct or knowing violation of the law;
o any action where the covered person received an improper personal
benefit in violation or breach of PREIT Associates' limited
partnership agreement;
o any violation of PREIT Associates' limited partnership agreement; or
o any liability the person may have to PREIT Associates under certain
documents delivered in the transaction in which properties were or
will be contributed to PREIT Associates
Currently, we maintain directors and officers liability insurance for
our Trustees and officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to Trustees, officers, or persons
controlling us pursuant to the foregoing provisions, we have been informed that
in the Securities and Exchange Commission's opinion, the indemnification is
against public policy as expressed in the Securities Act of 1933, as amended,
and is, therefore, unenforceable.
Item 16. Exhibits.
Exhibit
Number Description of Document
1.1* Form of underwriting agreement for offering of shares of beneficial interest
1.2* Form of underwriting agreement for offering of preferred shares of beneficial interest
1.3* Form of underwriting agreement for offering of debt securities (senior debt securities, senior
subordinated debt securities and/or subordinated debt securities)
1.4* Form of underwriting agreement for warrants and/or units
4.1*** Form of senior debt securities indenture
4.2*** Form of senior subordinated debt securities indenture
4.3*** Form of subordinated debt securities indenture
4.4*** Form of senior debt security (included in Exhibit 4.1)
4.5*** Form of senior subordinated debt security (included in Exhibit 4.2)
4.6*** Form of subordinated debt security (included in Exhibit 4.3)
4.7** Form of certificate of designation with respect to any preferred shares of beneficial interest
4.8** Form of warrant agreement for warrants sold alone, including form of warrant
4.9** Form of warrant agreement for warrants sold attached to equity securities, including form of
warrant
4.10** Form of warrant agreement for warrants sold attached to debt securities, including form of
warrant
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Exhibit
Number Description of Document
4.11** Form of unit agreement
4.12 Rights Agreement dated as of April 30, 1999 between the Trust and American Stock Transfer
Company, as Rights Agent, filed as exhibit 1 to the Trust's Registration Statement on Form 8-A
dated April 29, 1999, is incorporated herein by reference
5*** Opinion of Drinker Biddle & Reath LLP
8*** Opinion of Drinker Biddle & Reath LLP as to certain federal income tax matters
12 Computation of Ratio of Earnings to Fixed Charges
23*** Consent of Drinker Biddle & Reath LLP (included in Exhibit 5)
24*** Power of Attorney (see signature page of this Form S-3)
25.1** Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of the
trustee under the indenture with respect to the senior debt securities
25.2** Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of the trustee under the
indenture with respect to the senior subordinated debt
securities
25.3** Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of the
trustee under the indenture with respect to the subordinated debt securities
* To be filed by amendment, or as applicable to a particular offering of
securities, as an exhibit to a Current Report on Form 8-K, pursuant to
Regulation S-K, Item 601(b).
** To be filed as an exhibit to a report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934.
*** Previously filed.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the SEC pursuant to rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
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(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that the undertakings set forth in paragraphs (i) and (ii) above do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the SEC by the registrant pursuant to Section 13 or 15(d) of the Exchange Act
that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a trustee, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(6) The undersigned Registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time is was declared effective.
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(ii) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(7) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the SEC under Section 305(b)(2) of the Trust
Indenture Act.
- 73 -
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, Commonwealth of Pennsylvania, on
September 10, 2002.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
By: /s/ Jonathan B. Weller
---------------------------------------
Jonathan B. Weller,
President and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
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Name Capacity Date
---- -------- ----
*/s/ Ronald Rubin Chairman, Chief Executive Officer and Trustee September 10, 2002
-----------------------------------
Ronald Rubin
/s/ Jonathan B. Weller President, Chief Operating Officer and September 10, 2002
----------------------------------- Trustee
Jonathan B. Weller
*/s/ Rosemarie B. Greco Trustee September 10, 2002
-----------------------------------
Rosemarie B. Greco
*/s/ Lee H. Javitch Trustee September 10, 2002
-----------------------------------
Lee H. Javitch
*/s/ Leonard I. Korman Trustee September 10, 2002
-----------------------------------
Leonard I. Korman
*/s/ Ira Lubert Trustee September 10, 2002
-----------------------------------
Ira Lubert
*/s/ Jeffrey P. Orleans Trustee September 10, 2002
-----------------------------------
Jeffrey P. Orleans
*/s/ George F. Rubin Trustee September 10, 2002
-----------------------------------
George F. Rubin
*/s/ Edward A. Glickman Executive Vice President and Chief Financial September 10, 2002
----------------------------------- Officer
Edward A. Glickman
*/s/ David J. Bryant Senior Vice President - Finance and September 10, 2002
----------------------------------- Treasurer (Chief Accounting Officer)
David J. Bryant
*By /s/ Jonathan B. Weller (as attorney in fact)
--------------------------------
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EXHIBIT INDEX
Exhibit
Number Description of Document
------ -----------------------
1.1* Form of underwriting agreement for offering of shares of beneficial interest
1.2* Form of underwriting agreement for offering of preferred shares of beneficial interest
1.3* Form of underwriting agreement for offering of debt securities (senior debt securities, senior
subordinated debt securities and/or subordinated debt securities)
1.4* Form of underwriting agreement for warrants and/or units
4.1*** Form of senior debt securities indenture
4.2*** Form of senior subordinated debt securities indenture
4.3*** Form of subordinated debt securities indenture
4.4*** Form of senior debt security (included in Exhibit 4.1)
4.5*** Form of senior subordinated debt security (included in Exhibit 4.2)
4.6*** Form of subordinated debt security (included in Exhibit 4.3)
4.7** Form of certificate of designation with respect to any preferred shares of beneficial interest
4.8** Form of warrant agreement for warrants sold alone, including form of warrant
4.9** Form of warrant agreement for warrants sold attached to equity securities, including form of
warrant
4.10** Form of warrant agreement for warrants sold attached to debt securities, including form of
warrant
4.11** Form of unit agreement
4.12 Rights Agreement dated as of April 30, 1999 between the Trust and American Stock Transfer
Company, as Rights Agent, filed as exhibit 1 to the Trust's Registration Statement on Form 8-A
dated April 29, 1999, is incorporated herein by reference
5*** Opinion of Drinker Biddle & Reath LLP
8*** Opinion of Drinker Biddle & Reath LLP as to certain federal income tax matters
12 Computation of Ratio of Earnings to Fixed Charges
23*** Consent of Drinker Biddle & Reath LLP (included in Exhibit 5)
24*** Power of Attorney (see signature page of this Form S-3)
25.1** Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of the
trustee under the indenture with respect to the senior debt securities
25.2** Statement of Eligibility on Form T-1 under the Trust
Indenture Act of 1939, as amended, of the trustee under the
indenture with respect to the senior subordinated debt
securities
25.3** Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939, as amended, of the
trustee under the indenture with respect to the subordinated debt securities
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* To be filed by amendment, or as applicable to a particular offering of
securities, as an exhibit to a Current Report on Form 8-K, pursuant to
Regulation S-K, Item 601(b).
** To be filed as an exhibit to a report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934.
*** Previously filed.
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